Short-Term Investing Best In Near Term Risks Rising As Recovery Reaches Its Late Stages

Investors have often been counseled to have a longterm outlook when it comes to planning. In general that’s probably sound thinking.

But between now and 2000 they may be welladvised to take a shorter-term view, at least for the next couple of years.

Risks are rising and it will be increasingly important to be cautious and selective in order to find good long-term positions to take.

“You’ve got to be more flexible these days,” said Rick Sunshine, a portfolio manager in Jupiter, Fla. “Buying and holding isn’t going to make you a lot of money in the next five years.”

Although Sunshine and others agree that there are pockets of value in the market, they say bargains are hard to find. And some situations that look like bargains may well be black holes.

Take Mexico. Please.

In a recent Forbes magazine article, veteran investor Sir John Templeton was asked where the bargains are now. His answer? Funds specializing in the Czech Republic, Russia and Australian real estate investment trusts.

But not in the United States, where prices have been going up for the better part of four years and where economic recovery is further along than other areas around the globe.

“You have to know where you are in the cycle,” said Bill Geiger, a portfolio manager in Coral Gables, Fla. “You don’t want to be buying the aluminums, the coppers, the papers at the tail end of the business cycle, for example. During a recession their earnings get killed.”

Although it’s impossible to call market tops and bottoms with precision, it’s clear that investors face an economic recovery that’s long in the tooth as 1995 gets under way.

“It’s the only expansion that hasn’t ended yet,” quipped Barnett Banks economist John Godfrey.

On average, economic expansions in the United States since 1854 have lasted 35 months, according to the National Bureau of Economic Research. The current expansion which officially started in March 1991 is 46 months old.

None of this implies that a stock market crash or recession is imminent. Indeed, the markets may do fairly well this year and next, particularly if the Fed stops raising interest rates, as many pros think will happen this year.

Some economists argue that it takes longer than in the past for Fed monetary policy to be felt in the real economy, and that loan demand remains strong, so the recovery should continue for some time.

Money managers said for 1995 they like such areas as utility stocks and such financial stocks as banks and brokerages. They also like bonds, which would rally if the Fed changes its rate-raising policy later this year.