YOUNGSTOWN Economy will rebound, says analyst from Valley

Stocks are fairly valued now, which sets the stage for a market rally, he said.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- A Girard native who forecasts the economy on Wall Street is expecting a big rebound in the economy and in stock prices.
The Dow Jones industrial average will rise and could exceed 10,000 in 12 months, which would be an increase of nearly 20 percent from current levels, said Joseph Carson, senior vice president at Alliance Capital Management Corp.
The Dow, which tracks 30 large-company stocks, already is on the rebound. In the past two weeks, it has advanced 17 percent to about 8400.
Carson, who received bachelor's and master's degrees from Youngstown State University, said the stock market decline of the past two years has pushed down prices so far that they are at historically normal levels for the first time in five years, when compared to company earnings.
"The market is now fairly valued," he said in a speech to YSU students Tuesday. He came back to campus as part of the Williamson Symposium Series.
Sectors that look good include consumer-goods companies, such as General Electric, Whirlpool and General Motors, and companies that would benefit from other businesses investing in new plants and equipment, he said.
Explaining the data
Carson explained to students the data he uses to forecast the ups and downs of the economy. Even though his forecast is optimistic now, he showed how he was able to predict in 2000 that there would be a recession in 2001.
He said two things could hold back the current economic expansion -- lack of confidence by people and companies and a war with Iraq. He said he thinks a U.S. attack would be bad for the economy, but his forecasts are based on war being avoided.
"If you don't believe war will happen, I would suggest buying stocks and certain corporate bonds," he said.
He added that he thinks consumers and companies will show confidence in the economy and spend money.
Other factors
Other developments already are pushing the economy forward, including companies with positive cash flows, low interest rates, the government encouraging spending and low business inventories.
The gross domestic product, which is the value of goods and services produced and income earned, should increase by more than 3 percent next year, he said. Quarterly increases so far this year have been between nearly 0 percent and 2 percent, while quarterly changes in the GDP in 2001 fell into negative numbers.
shilling@vindy.com