Market report
Expert gives reasons that justify encouraging stock market outloofl
By JOHN CUNNIFF
AP Business Analyst
NEW YORK (AP) - One of
the most encouraging stock
market outlooks, one that if
correct would mean a Dow
Jones industrial average of 1700
within five years, has been is
sued by the conservative Wright
Irivestors Service.
Claiming “the basic economic
forces which have depressed
both the American economy
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and security prices have now
decisively reversed their long
term trends,” John Wright sug
gests that “realistic optimism”
is now justified.
Wright, whose organization
supplies the basic research for
hundreds of millions of dollars
in trust and pension funds,
made the evaluation in his an
nual message to the New York
Society of Security Analysts.
In it he stated that a high of
1150 points or better might be
realized before the end of 1977,
and that following a relatively
minor bear market reaction in
1978, the general upward thrust
will be resumed.
During this time, he said, a
well-diversified portfolio of high
quality equities which is held
throughout minor cyclical ups
and downs will “unquestionably
outperform the market average
and any so-called index funds.”
Wright, who bases his fore
casts on fundamental economic
and market research, is highly
regarded by other investment
advisers, many of whom base
their own estimates in part in
his organization’s studies.
The past 10 years have wit
nessed the evolution, and the
past five years the end of an
era, Wright said, during which
formation and distribution of
investment capital was
“eroded, dissipated and export
ed.”
The result, he continued, was
“to bring down around us the
structure of security valuations
and distribution.” This “sorry
and destructive era” now is be
hind us, and a new progressive
period is ahead, he said.
Chief among the reasons, in
his opinion, is that the decline of
capital formation through
personal savings has been re-
Page 7
versed as a result of an
“enormous buildup” of funded,
tax-deferred employe benefit
plans.
Rising at an 8 per cent com
pound annual rate, these funds
now total more than S4OO billion,
Wright noted, and must by law
be invested in bona fide capital
items, mainly corporate equity
and debt.
He listed as among the other
reasons for his bullishness:
— Griffin Daily News Wednesday, January 5,1
—“The outflow of corporate
capital to industrial appli
cations abroad has been re
versed as the aspirations of for
eign workers and the inflation of
foreign production costs rose to
and beyond the point of com
petitive parity with the U.S.”
—The decline of the dollar
and the flight of investment
capital have been replaced by
renewed world confidence,
making the dollar “once again
the principal international *<U
rency of refuge.’”
—The fundamental
the excessive inflation of 1(S
1975 no longer exist.
—The very long-term tr«
towards higher interest ral
has been reversed. Futifl
prime rates should be mifl
closer to 6 per cent than to I
ther the excessive highs of fl
past 10 years or the lows of fl
great depression of the 193tt|
