- The Washington Times - Wednesday, August 27, 2003

With Wall Street’s rally in its sixth month, many mutual fund managers believe this rebound is for real.

The false starts and fizzled advances of the three-year bear market have left many investors skeptical.

But fund managers, while they see reasons to be cautious, mostly are optimistic that the market and the economy will stay on their upward path.

Here’s a look at what some fund managers have to say:

• John Waterman, manager of Nuveen Rittenhouse Growth fund.

“We think the economy and the market are really linked,” said Mr. Waterman, a reference to economic data as well as Wall Street having been on an upward path.

Earlier in the bear market, Wall Street would often look past positive signals on the economy, because they weren’t consistent. But that is changing, Mr. Waterman said.

“This time we think there is more staying power in the economy,” he said. “This time we think there’s more momentum being developed…. We think the economic recovery has some legs to it.”

Lately, Mr. Waterman has been encouraged by signs of stability in the job market, often one of the last areas of the economy to turn around.

Still, with the market’s major gauges sharply higher for the year, Mr. Waterman predicts that Wall Street won’t advance much between now and the end of the year.

Nuveen Rittenhouse Growth’s A-share fund has had a year-to-date return of 10.64 percent, according to Morningstar.com.

• Jack Holden, manager of the Touchstone Value Plus fund.

Mr. Holden said Wall Street has been caught in a vicious cycle — companies won’t increase their capital spending until the market improves, while the market’s recovery is largely contingent on a boost in corporate spending.

“It is sort of the who-will-blink-first syndrome,” he said.

But Mr. Holden believes that cycle is about to end, and he cited such recent events as Intel Corp. raising its third-quarter sales forecast.

“I believe ultimately the economy will improve, that it is improving and you will see capital spending unleashed,” he said.

Mr. Holden added: “We have sort of made the call in our own mind that the economy will improve and that this vicious cycle will turn into a virtuous one,” of companies spending more money and stocks trending higher.

Touchstone Value Plus’ A-share fund has had a year-to-date return of 14.73 percent, according to Morningstar.com.

• Darcy McLaren, co-manager of the Safeco Equity fund.

“My take on it, first of all, is there are enough currents of a [positive] change that I think the economy is strengthening,” Ms. McLaren said.

But, she cautioned, stocks might have a hard time keeping up with the economy because they aren’t as cheap as they were when the market hit its lows for the year in March.

“I think the economy will continue to strengthen. We have had the first move … and as we get more conviction in the economy, you will get a second move later that isn’t as steep,” Ms. McLaren said.

“But whether that [move] is this year, I don’t know.”

Safeco Equity’s A-share fund has had a positive return of 13.22 percent this year, according to Morningstar.com. The fund’s name will change to Safeco Core Equity on Oct. 1.

• Michael Ziehl, manager of the Guardian Park Avenue Small Cap fund.

Mr. Ziehl, like Ms. McLaren, is more cautiously optimistic.

He said he believes that the economic recovery is under way, but that stocks could still be in for some bumps, especially when economic data disappoints investors.

Mr. Ziehl predicts a “slow and not terrible steady [economic] recovery, not an off-to-the races type of recovery,” and said of the stock market, “we would do well just to hold these gains.”

The Guardian Park Avenue Small Cap’s A-share fund is up 22.71 percent this year, according to Morningstar.com.

• Tom Rowland, manager of the Wayne Hummer Growth fund.

“I think it’s for real,” he said.

Mr. Rowland is encouraged by signs that corporate spending is increasing and by a pickup in retail sales.

Wal-Mart, for example, raised on Monday its same-store sales estimates for the month.

“There have been some head fakes in the past,” said Mr. Rowland, referring to rallies that fizzled in the bear market. “But things look to be on track.”

The Wayne Hummer Growth fund has had a year-to-date return of 15.08 percent, according to Morningstar.com.

ASSOCIATED PRESS

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