Wednesday March 22 12:53 AM ET
J.P. Morgan Bearish on High-Technology Stocks
TOKYO (Reuters) - U.S. investment bank J.P. Morgan brought its bearish view of Wall Street to Tokyo on Wednesday, advising fund
managers to shun in particular high-tech stocks that it said looked far too expensive.
Chief equity strategist Douglas Cliggott told clients that tightening liquidity, higher interest rates and declining profit margins would gradually take
their toll on U.S. stock markets, especially the high-flying Nasdaq.
``This is a very high-risk environment for the U.S. stock market if we're right and global liquidity conditions are going to tighten over the next 12
months,'' Cliggott said.
J.P. Morgan has a year-end target of 1,300 for the S&P 500 and 10,200 for the Dow Jones Industrial Average. The Dow soared 2.13 percent
on Tuesday to close at 10,907.34 while the broader Standard & Poor's 500 index gained 2.56 percent to 1,493.87.
Cliggott joked that he was unable to hazard a guess at the Nasdaq but said history pointed to an eventual retreat toward its 200-day moving
average, which he said was now around 3,200. The Nasdaq jumped 2.21 percent to 4,711.68 on Tuesday.
Cliggott said Internet infrastructure companies in particular might enjoy another year or two of heady growth but it took heroic assumptions to
justify paying, in some cases, up to 200 times annual earnings for such stocks.
``Spectacular companies are no longer spectacular stocks,'' he said.
J.P. Morgan recommends that investors go overweight in only two sectors -- consumer staples and energy -- which it believes will offer
protection against a looming economic slowdown as the Federal Reserve's interest rate increases bite.
``It'll take a while -- it has taken a while -- but I'd be very surprised if we didn't start to see an impact this year,'' he said.
Among suggested stocks, Cliggott singled out Pepsi (NYSE:PEP - news), Procter & Gamble (NYSE:PG - news), General Mills (NYSE:GIS -
news), Bristol Myers (NYSE:BMY - news) and Schering-Plough (NYSE:SGP - news).