Heard on the street: Two strategists expect 1,000-point move in the market, but in different directions
Morgan Stanley's market strategist Byron Wien is looking pretty good so far on his April prediction that the Dow Jones Industrial Average would begin a 1,000-point decline this year. So far, the Dow industrials have fallen 296 points from their May peak.</br></br>Now a respected rival has come forward with almost a mirror-image prediction. Edward Kerschner, PaineWebber's market strategist, has just told his firm's clients that the Dow industrials will rise about 1,000 points in the next 18 months.</br></br>Wall Street gurus often shroud their predictions in enough mist that they later can claim they were right, no matter what happens. And lately, bold market predictions have been a bit rare. But Mr. Wien and Mr. Kerschner are being unusually blunt and explicit with their 1,000-point bets. For investors, a lot rides on whose reasoning is more compelling.</br></br>Mr. Kerschner maintains that inflation is licked, and that interest rates are in a gradual but dramatic downtrend that will take yields on long-term bonds all the way down to 5% by the end of 2001, from about 7% today. Low interest rates make very healthy fertilizer for stock-market rallies.</br></br>Mr. Wien's bearish stance stems from his belief that the economy will be stronger than most people expect. As companies clamor for money, he says, interest rates will rise, poisoning the stock market. He also says that various technical market indicators are flashing red. "The 1,000 points, in all honesty, was picked for its drama," he says. "But I'm not backing off" -- even though the market has rebounded by 132 points since mid-July.