A stock-watcher of note sees a longer bull run
Interview / Ralph Acampora
Are market gyrations of the past few months getting you down? Thinking of getting out of stocks altogether? If so, stay calm. The current bull market should extend right up to the year 2011, says Ralph Acampora, chief technical analyst for investment house Prudential Securities Inc., in an interview.
Yet along the way, he warns, investors will experience some wild rides, including corrections and even severe downturns - including the current market doldrums.
Despite what he calls "short-term problems," Mr. Acampora is convinced the stock market should be back on course later this year or by the middle of next year, in part aided by the generally upbeat election-year political cycle.
Election years, and the first year of a new administration, have historically been solid periods for stocks, he says. The Dow should be up about 12,000 points, he believes, well above the current 10000-to-11000 point range.
Acampora explains his view in his just-published a book: "The Fourth Mega-Market: Now through 2011" (Hyperion).
For those who don't remember, Acampora was the analyst who back in 1995 stunned the financial community by predicting the Dow Jones Industrial Average - then at about 4,500 points - would climb to 7,000 points within the coming three years. He was right. He also saw the Dow hitting the 10,000 in 1998. His timing was off a little - it didn't hit that mark until March 1999.
Acampora now predicts the present bull market will run through the first decade of the 21st century, carrying the Dow up to "at least 20,000 points." Moreover, the current market is not just a bull market, he says, but a "megamarket," a supersize bull market.
Acampora believes this is the fourth US megamarket. The other three, he says, occurred in 1877-1891; 1921-1929; and 1949-1966. In each case, they created astonishing new wealth.
This fourth megamarket, he believes, will last about 17 years. Acampora stresses that he is not just basing his analysis on mathematics. He earned degrees in history and political science before becoming a stock analyst. (He also worked toward a degree in theology.)
In looking at megamarkets, three important observations stand out, he says: First, they occur in an era of major peace. The market of the 1870s and 1880s - the so-called Gilded Age - followed the US Civil War, which had ended in 1865.
The prosperity of the 1920s occurred after the end of World War I. The market of 1949 followed the end of World War II. And the current market follows the end of the cold war with the former Soviet Union.
In each case, dollars, factories, and manpower - tied up for military projects - are diverted to the civilian economy. Minor wars, or "police actions" do not count, says Acampora, since they do not require full mobilization of the economy.
Thus, the key event for our megamarket, he believes, was the fall of the Berlin Wall in 1989. The current bull market, he feels, "started in 1994."
The other two factors propelling a megamarket, he says, are major technological breakthroughs and low inflation. After the Civil War, he says, the railroads undergirded the "new economy."
In the 1920s, it was the automobile and radio; in the 1960s and '70s, television and computers, plus the birth of the national-highway system.
Today's economy, he says, is based on the Internet and bio-medical advances.
The dazzling success of AOL in the 1990s and early 21st century is not really a new phenomenon, Acampora argues. "RCA was the AOL of the 1920s."
RCA's stock started at $7 in 1924, and by 1929 had soared to $572 - a gain of over 8,000 percent. And industry groups also soared - the automotive group alone flew up over 1,000 percent in the 1920s.
In the 1950s and '60s, IBM, ITT (International Telephone and Telegraph), and Xerox powered the market. The computer-hardware group - the best performing group - shot up "an unbelievable 3,206 percent," well ahead of the Dow's gain of 519 percent during the 1960s, he says.
In looking for potential winners, consider both major sectors as well as sectors "servicing" the major sectors, Acampora says. In the Gilded Age, he notes, the railroad industry grew by some 290 percent. But the railroad equipment industry, which serviced the railroads, rose an astonishing 850 percent.
Jump to now: The Internet is technologically in the ascendancy. But perhaps posting even greater gains than net stocks are the firms that service the Internet, such as Cisco Systems, which provide "routers" for Internet firms, he says.
(c) Copyright 2000. The Christian Science Publishing Society