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- Alan Lavine and Gail Liberman

The big question. What are we going to earn on stocks and bonds this year? A few experts suggest what to expect.

But please don't bet the ranch on their prognostications. A forecast really means there is a 50 percent chance it will happen. There is a lot of room for error. So no one knows for sure. Otherwise these experts would keep the information to themselves.

Nevertheless, these money managers have a feel for the markets.

Bill Gross, the top-performing bond manager of the Pimco Total Return Fund, thinks bonds will gain 8 percent next year. He's not talking about U.S. Treasury bonds, but higher-yielding mortgage and corporate bonds. The reason: Inflation is low and the Federal Reserve will not be raising interest rates until the economy has been growing for at least a year.

Eight percent is not a sure thing. Gross said in a recent report that he's assuming that inflation will be at 1.5 percent. Meanwhile, stocks will only gain 5 percent this year. So if his forecasts are off, bonds may not gain as much.

Other money managers are more optimistic about stocks. CDC IXIS Asset Management Advisors Group, Boston, surveyed 33 mutual fund managers at 10 different companies, representing value and growth stocks, international stocks, real estate and bonds. Those surveyed include The Oakmark Funds, Loomis Sayles, RS Investments and Capital Growth Management.

The result of the survey:

  • The S&P 500 will rise 9.5 percent after racking up two years of losses that totaled 20 percent. The Dow Jones Industrial Average will gain 7.4 percent. The Nasdaq will be up only 4.4 percent in 2002.

  • The economy will rebound in 2002. Interest rates will remain at today's levels, while inflation will decline. The majority of the managers see economic growth ranging from 0 percent to 3 percent.

The Enterprise Group of Funds also did a survey of 25 different mutual fund managers with more than $4 billion in assets under management. They see the Dow Jones Industrial Average up 10 percent this year. The S&P 500 will gain 11 percent. The best-performing stock sectors will be in the healthcare, financial and energy industries.


Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books).

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