Markets Have Further to Fall, Analyst Predicts

Byron Wien, U.S. investment strategist for Morgan Stanley Dean Witter & Co., said Thursday he expects further declines in U.S. stocks that could drop the technology-heavy Nasdaq composite to levels last seen in November.

Unlike Goldman Sachs Group counterpart Abby Joseph Cohen, Wien has long been considered bearish, appalled at high valuations in the tech sector. But the scenario Wien described would mark a further step back for the Nasdaq, already jolted this spring and still down 25% from its peak.

The Morgan Stanley strategist also said that a broad decline of about 25% across the major stock market indexes could slow U.S. economic growth to the point that the Federal Reserve would delay further tightening of monetary policy--but he said he does not see the Fed easing policy to blunt a possible downturn.

“I think the Nasdaq could go back and test and possibly break the November lows,” Wien told reporters on the sidelines of an economics conference north of New York City.

November marked the start of a Nasdaq buying spree that culminated in the composite’s record closing high of 5,048.62 on March 10. During November, the Nasdaq roughly traded between 3,000 and 3,500.

Since the March high, Nasdaq has dropped into a bear market (or more than 20% down from the peak). Thursday, the composite climbed 143.94 points to close at 3,774.03.

Wien said the best value for stock investors is in traditional companies. “I think the old economy is the place to do your shopping,” he said.