INVESTING Economists predict smaller market gains this year

Stock returns will average 8 percent to 10 percent this year, one speaker said.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
BOARDMAN -- If you made a killing in the stock market last year, pat yourself on the back, but don't expect a repeat of that dramatic stock performance in 2004.
Two National City Bank economists discussing investment prospects Wednesday said the market isn't likely to duplicate its 2003 growth of nearly 30 percent anytime soon, but there's still plenty of reason to be optimistic about this year's economic outlook.
The perfect time to start investing in stocks was very early last year, said Timothy Swanson, National City's executive vice president and chief investment officer. The economy was just starting to emerge from a long downturn and most share prices were low.
Swanson and Richard DeKaser, National City's chief economist, were featured speakers at an economic outlook breakfast meeting for the company's investors and clients at Mr. Anthony's banquet center.
"The best time to buy is when nobody else wants to buy, when everybody is pessimistic and costs are down," he explained. "The worst time is the year after a very good year, because costs are up."
Still, Swanson said stocks will continue to offer investors an effective return "in the high single digits," substantially more than passbook savings account and certificate of deposit interest rates.
He said interest on bonds will probably be low this year, since bond returns generally go up when stock returns are down, and vice-versa.
A look back, ahead
Looking at recent history, Swanson demonstrated stocks averaged a 28.7 percent return in 2003, their first positive year since 1999, compared with a low 2.4 percent return for intermediate government bonds.
Over the past 10 years, stocks on the S & amp;P 500 had an average return of 185.6 percent, while bonds earned a 10-year return of 86 percent.
This year's presidential election bodes well for the stock market in the coming months, Swanson said, unless President Bush loses. He said records from 1900 through 2003 demonstrate that stock values generally start off at moderate levels, then climb in a presidential election year, falling only when an incumbent party loses.
Growth factor
DeKaser said business inventories were at historic lows in December, another promising growth factor for the economy because it should trigger more sales.
The economic turnaround that began last year has been called a "jobless recovery," but DeKaser pointed to employment figures showing increased hiring since last summer.
"Last year, businesses still weren't sure about the recovery so they were hunkering down, postponing hiring and spending," he said. "Hiring always lags behind other types of spending, but we should see job numbers pick up even more this year."
vinarsky@vindy.com