Analyst Not Cheered by Rally, Sees Rough Sledding for Next 2 Quarters

Douglas Cliggott won’t win any awards for Christmas spirit.

The J.P. Morgan Securities analyst shrugged off Wall Street’s abbreviated Santa Claus rally to declare that he isn’t expecting a renewed bull market any time soon.

Cliggott’s pronouncement should take a little of the froth off the holiday eggnog. As Morgan’s chief investment strategist, he was virtually alone a year ago in predicting the painful market slide of 2000.

Cliggott believes the U.S. economy won’t pick up again until late next year, even if the Federal Reserve cuts interest rates early in 2001.

“We could have another couple of rough quarters,” he said. “I don’t think we’ll see a turn in technology [profits] until late 2001 at the earliest.”

That’s why he’s recommending investors stick with companies whose earnings hold up well even in a slowing economy, such as health insurer Cigna (ticker symbol: CI), drug maker Schering-Plough (SGP), and household products company Procter & Gamble (PG).

A year ago, Cliggott predicted that the Standard & Poor’s 500 Index would finish this year at 1,300 when most of his peers where forecasting an average of 1,525. With a week left in 2000, the S&P; 500 stands at 1,305.97, down 11% for the year.

“There’s been an increasing mood of pessimism, about the economic outlook, the earnings outlook and hence, the market outlook,” Cliggott said. “The market rarely goes down in a straight line, but we see a bottom in the summer and the S&P; 500 finishing 2001 at 1,400.”

That would be a 7.2% increase from Friday’s close.

A year ago, earnings expectations were too high and the Fed pumped money into the economy to forestall any problems from the so-called Y2K computer transition, Cliggott said.