Published July 2003

Economic forecast:
market gains, continued
low interest rates

By Eric Fetters
Herald Business Writer

The market will continue going up, but interest rates should stay down and the economy is likely to remain flat.

Those were the predictions Terry Sandven delivered in June at an investors forum sponsored by U.S. Bancorp Piper Jaffray.

Sandven, director of portfolio strategy for Piper Jaffray, said the major markets are poised to end their losing streak after three years of losses.

“With the Standard & Poor’s 500 being up 12 percent for the year now, we’re very doubtful this year will end in the negative,” he told scores of investors gathered at the Howard Johnson Plaza Hotel in Everett.

In addition to the strong performance of the market in the year to date, Sandven pointed out that history is working in investors’ favor. The stock markets haven’t had four losing years in a row since the Depression, and the markets tend to perform well in the third year of presidential terms.

“I’m confident you’ll see positive returns in the market, if for no other reason, I don’t see any catalyst to bring it down,” Sandven said.

While he’s optimistic about how the stock markets have performed in recent months, Sandven added that he’s nervous about the increasing talk about “the return of a bull market.”

The markets’ relatively fast rise over the past six months and optimistic expectations could lead to a dip in the market if there’s any disappointing financial news in the coming months, he said. Sandven also warned investors that the summer months could bring large drops, as they did last year.

While investors may be seeing the end of hard times on Wall Street, Sandven isn’t convinced that things on Main Street will get much better before the year ends. He and other economists are paying special attention to the unemployment rate, which hit a nine-year high in May.

One continuing bright spot for consumers could be interest rates, which are at 40-year lows. Over the past two years, home buying and refinancing spurred by the low rates have helped keep the economy moving. Sandven said he doesn’t see rates going up significantly in the next year.

In reviewing this year’s top-performing stocks, Sandven said technology-related stocks have done surprisingly well. He attributes that to a return in the “appetite for growth” among investors. Also, because businesses have put off buying new computers and equipment during the slow economic times, those companies could do well as businesses finally update in the next few years.

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