Standard & Poor’s believes that relative valuations of small-, mid-, and large-cap issues suggest money will shift to large-cap stocks this year. Prospects for large-cap companies look good because of the lower dollar, which favors large exporting companies. In addition, large caps are also likely to gain this year because they include a high number of defensive companies, which traditionally outperform in the second year of bull markets.
Historically, the S&P 500 stock index, a benchmark for large-cap blend funds, gains about 13% in the second year of a bull market, according to Standard & Poor’s research. The S&P 500 is likely to see double-digits gains in 2004, rising to 1,230 by year-end, according to Standard & Poor’s Investment Policy Committee.
Large-cap companies, which often include multinational firms, are likely to gain in 2004 because much of this year’s growth is likely to come from overseas, says Robert Hagstrom, manager of Legg Mason Focus Trust (FOCTX). Hagstrom said large-cap companies are also likely to benefit disproportionately from high productivity gains in the U.S. economy.
Todd Ahlsten, manager of Parnassus Equity Income Fund (PRBLX), thinks the S&P 500 is likely to be up 15% this year, though 2004 could include a market correction. A self-proclaimed “Warren Buffett- style” manager, Ahlsten notes that large-cap companies have traditionally outperformed in U.S. presidential election years.
Some large-cap stocks are also likely to benefit from higher oil prices in 2004, which will spur energy companies, and from attractive valuations, due to the recent Nasdaq correction, said John Thompson, manager of Thompson Plumb Growth Fund. That portfolio has been a top performer over the three- and five-year periods.
Related Articles
Comment on This Article