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Look for a Warren Harding kind of year for the stock market in 1998.

You know, a return to normalcy.

That means, after an unprecedented three-year string of 20 percent-plus gains, the stock market's returns will slip to more normal levels, probably in the 8 percent to 12 percent range.

At least that's the way the market looks to a handful of local brokers and investment advisers, who peered into their crystal balls to give us a glimpse of what they see happening in 1998.

But it won't be smooth sailing. With the fallout from the Asian financial crisis still making its way into the U.S. economy and earnings growth expected to slow, the advisers all agree that 1998 could be even more volatile than this year.

If they're right, the stock market still will extend its seven-year winning streak to an eighth year with a solid, if unspectacular gain.

Of course, that's what our advisers thought would happen this year, proving only the perilous nature of trying to forecast the ups and downs of the stock market over as short a period of time as a year.

Nevertheless, this is what they predict:

Corporate profits will come under pressure as the plummeting value of Asian currencies makes it harder for U.S. companies to export products to those markets and cuts the prices of Far Eastern goods sold in this country.

Interest rates will inch lower. The yield on the benchmark 30-year Treasury bond could slide to around 5.25 percent or 5.5 percent.

The overall U.S. economy will continue its recent trend of slow, yet steady growth.

Inflation will remain well in check, with the Far Eastern crisis further eroding the ability of U.S. firms to raise prices.

Money will continue to flow into stocks, as aging Baby Boomers try to save for retirement, while bonds and bank investments remain unattractive because of their low yields.

Put it all together, and the advisers see a recipe for another solid year for the stock market. But they also see a lot of potential for big swings by the Dow Jones Industrial Average.

On the positive side, the economy is expected to remain steady and inflation doesn't seem to be much of a concern. Yet the stock market also remains high-priced and the Asian crisis could bring earnings under pressure and lead to even slower growth and some nasty profit surprises.

"This year, for sure, we will have a correction that finally tests the staying power of all that money" that has flowed into stocks during the seven-year-old rally, says Francis G. Leonard, the president of Courier Capital Corp. in Buffalo.

Who's right? Only time will tell.

The bulls

The upbeat view is that the same economic factors that helped propel the stock market to spectacular returns during the last three years will keep pushing share prices higher -- albeit at a slower pace.

The bulls think the economy will keep growing at an annual rate of around 1.5 percent to 2.5 percent, with the Asian financial crisis putting a bit of a damper on growth, but not delivering a crippling blow.

That slow growth -- coupled with the flood of cheaper imports created by the weakening of Far Eastern currencies -- will keep inflation well in check.

"U.S. companies have totally lost pricing power," says Leonard, who thinks the Dow will finish next year up about 3 percent at 8,000, although it could dip as low as 6,300 and rise as high as 8,700 during the course of 1998. "I think what's going on in the Pacific Rim is far more important than people today are willing to accept."

The Asian problems could lead to lower profits next year, which will limit the stock market's upside potential, says Ronald M. Roche, a senior portfolio manager at Robshaw & Cheskin Associates in Amherst.

"The companies that have a lot of exposure to Asia will have earnings problems," says Roche, who thinks the Dow will rise by about 12 percent to 8,700 at the end of next year. But Roche expects the European economies to be strong, which should more than offset the Asian difficulties since Europe is a larger trading partner for the United States.

Thomas Ackerman, vice president at Fleet Investment Advisors in Buffalo, says corporate profits may rise by only 5 percent next year, which is why he picks the Dow to finish 1998 up 9 percent at 8,500.

The Far East financial crisis also will help bring more money into U.S. markets, as foreign investors seek a safe haven, says Arthur A. Glick, senior vice president at Prudential Securities Inc.

"If money goes out of the Pacific Rim, where's it going to go?" asks Glick, who perennially is the most bullish of the bulls and, once again, has set the highest target for the Dow at 8,750 -- a 12 percent gain. "I think we'll get at least our fair share."

Further buttressing the stock market will be a slight drop in interest rates, made possible by continued low inflation and slow growth in the economy. Several of the advisers think long-term rates could slip to around 5.25 percent or 5.5 percent.

"If we don't see a lot of growth, there's no reason to raise interest rates," says Rosemary A. Ligotti, senior vice president at Moors & Cabot Inc. in Amherst, who is expecting a 9 percent rise in the Dow to 8,500. "We've got a great economy. We've got the best of both worlds."

But next year's stock market won't be an easy one to make money in. Most of the advisers say they expect even wider price swings than the market endured this year. "There will continue to be volatility because there's so much uncertainty out there," says Christopher C. O'Donnell, a portfolio manager at Elias Asset Management in Amherst.

O'Donnell thinks many U.S. companies will be hard pressed to overcome all of their challenges and keep reporting the higher profits that investors now are expecting. The Asian crisis, coupled with rising labor costs at home and a domestic market that is increasingly resistant to price increases, will bring the stock market's returns back to more normal levels, he says.

"Next year, we think earnings will be tougher and tougher to come by," says O'Donnell, who thinks the Dow will rise by about 9 percent and finish 1998 at 8,500. "Earnings are going to be a real critical factor."

With stocks already trading at what traditionally are high valuations, bad news, such as earnings disappointments, will cause those stocks to get absolutely hammered.

That means investors are going to have to be choosey. "It's going to be definitely a stock pickers market, more so than ever," says Linda Cromwell Benzel, senior vice president at Niagara Investment Advisors in Buffalo, who expects the Dow to finish next year up 7 percent at 8,300.

The bear

For the second year in a row, Hy Scheff, vice president at A.G. Edwards & Sons Inc. in Amherst, is predicting that the Dow's winning streak will come to an end.

Asia, soft earnings and high consumer debt all will combine to drag down the stock market, in Scheff's pessimistic view. And if the economy softens, Scheff thinks interest rates already are so low that another modest cut won't add much fuel to stoke the business climate.

If Scheff is right and the market tumbles sharply, the 40-year veteran of the investment business thinks some less experienced investors may finally get scared out of the markets, rather than following their recent pattern of buying more stocks on price dips.

He doesn't think the catalyst will be Asia or anything else that's simmering today. It probably will be another unexpected event.

"I think you're going to see some capitulation," says Scheff, who thinks the Dow will finish the year down about 17 percent at 6,500. "What's going to start it, I can't tell you," he said.

The hot stocks

While our experts don't necessarily agree on the particular stocks that will thrive next year, many of them agree that a few industries are likely to do well in 1998.

Bank and financial stocks should be bolstered by low interest rates and continued consolidation, especially among smaller and regional banks. Technology stocks, which have been battered over the last few months by Asian uncertainties, look good at their current depressed prices. Drugs and broadcasting stocks also are popular.

The overwhelming favorite pick for 1998 is chip maker Intel, which has dropped sharply in the wake of the Asian crisis. Half of our experts -- Roche, O'Donnell, Leonard and Ms. Benzel -- say Intel is a buy.

Among financial stocks, mortgage remarketer Fannie Mae is a favorite of Roche and O'Donnell, while Glick and Ms. Benzel both like Citicorp. Broadcaster and financial services giant General Electric made the lists of both Ms. Ligotti and Roche.

Otherwise, the advisers went their separate ways.

Scheff's picks focus on tech stocks, including electronic systems maker Teradyne Inc., chip maker Advanced Micro Devices, networkers Act Networks and Bay Networks, along with thin film maker Applied Materials and Cabletron Systems. "I like a lot of the computer stocks," he says. "The stocks really have been buried." Scheff also likes top-notch health maintenance organization stocks.

Ms. Ligotti likes telecommunications services firm Winstar Communications Inc., as well as broadcaster Clear Channel Communications. Among drug stocks, she likes Pfizer and Columbia Laboratories, as well as biotechnology firm Ogranogenesis. In the financial sector, she prefers small regional banks, like First Tennessee National and Yardville National. She also likes building suppliers Louisiana Pacific and Elcor Corp.

Roche's recommendations include tobacco giant Philip Morris Cos., drug maker American Home Products, insurance and broadcasting firm AFLAC Inc. and Corning Inc.

Glick's picks include regional bank KeyCorp and mutual fund firm Franklin Resources, as well as casino operator Mirage Resorts, soft drink maker Pepsico and energy producer Benton Oil and Gas.

O'Donnell's pick emphasize firms with a long history of earnings growth, including drug maker Bristol Myers-Squibb, financial services firms like Travelers Group, American Express and Banc One Corp., broadcaster CBS and Disney Corp.

Leonard's selections emphasize regional bank stocks, like Fleet Financial Group, BB&T Corp. and TCF Financial, as well as biotech firm Amgen, HMO provider MedPartners Inc. and medical products maker Boston Scientific. Among tech stocks, he likes IBM Corp. and Electronic Data Systems.

Ms. Benzel also likes regional banks First Security Corp. and Compass Bancshares Inc., along with money center bank Chase Manhattan Corp. She also recommends chip maker Texas Instruments and drug makers Eli Lilly and Merck.

Ackerman didn't recommend any individual stocks, but he thinks international and small-cap issues will do well this year, mostly because they've lagged recently.

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