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Saturday Morning News

What Does the New Year Hold for the Stock Market?

Aired December 30, 2000 - 9:22 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

KYRA PHILLIPS, CNN ANCHOR: The year 2000 took some investors for a wild ride on Wall Street. So what does the new year hold for the stock market?

Michael Sivy joins us from New York with his predictions. He's the New York bureau chief for "Money Magazine." Hi, Michael. Can you hear me OK, Michael?

MICHAEL SIVY, "MONEY MAGAZINE": I'm hearing you fine.

PHILLIPS: Terrific. All right. Actually, this is a really great time to buy. Let's talk about the bargains out there.

SIVY: Well, that's right. I mean, this year has been very different from the last five, where stocks have just gone up and up and up, and we've had a huge selloff, particularly in tech stocks. And so for people who are interested in bargain hunting, I think the next six months are going to be a great time. I'm not sure we're at the bottom yet. There's still going to be some -- I think some rocky time in the market ahead of us.

But if you're looking out three to five years, the next six months is going to be a great time to buy.

PHILLIPS: And there are some other positives, lower inflation, steady growth rate, right?

SIVY: Yes. You know, I think what's happened is that the Fed has kept interest rates too high. The economy is slowing more than they would have liked. But what that means is that we're going to see some big interest rate cuts next year, quite possibly a full percentage point or more. And those will be mostly in the first half, and if we get some tax cuts as well, which I think is very likely, we should be in a pretty good position by the second half of the year for the market to start upward again.

PHILLIPS: All right, let's analyze some of the main factors that'll affect the market -- the markets, rather, in 2001. The political stalemate in Washington?

SIVY: Well, I think the significance is really that the economic slowdown is going to make tax cuts easier than everyone had expected. You know, the thought was that the stalemate would prevent tax cuts, but Bush and Cheney want them, and with the economy slowing as much as it is, I suspect we'll see Alan Greenspan, the Fed chairman, endorse tax cuts sometime over the next few months.

PHILLIPS: What about the energy crisis, what we're seeing going on in Southern California? Is that going to play a part on the markets? (inaudible).

SIVY: Well, I think the California situation is kind of specific to deregulation there, which is -- has kind of turned into a mess. We -- the bigger question, of course, is energy prices, oil prices, and natural gas prices, which affect the country as a whole.

And, you know, those are a little bit inflationary, and they do present a little bit of a drag on growth, but I suspect we'll actually see energy prices come down over the next year or so. I think the energy stocks have had most of their run.

If I were looking at stock groups now, I mean, the obvious place to be hunting is in technology. And particularly in companies related to personal computers and also to telephones, telecom, you know, AT&T, WorldCom, the long distance phone companies have really been slaughtered, and everything in that industry is looking kind of cheap.

PHILLIPS: Michael Sivy, thanks for the advice, sir.

SIVY: OK, good to be with you.

PHILLIPS: All right. We'll see you again.

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