Money Managers Still Uncertain Where Stock Market Is Headed

IT'S worrying and waiting time on Wall Street. The United States stock market, which has gained 125 points on the Dow Jones industrial average index since June 30, has nevertheless wobbled back and forth in a trading rut in recent days.

Barring an unexpected upturn in the economy, that pattern is expected to continue through the remainder of the summer.

``There are just a lot of unanswered questions here that investors are concerned about,'' says Hildegard Zagorski, a vice president with investment house Prudential Securities Inc. in New York. ``[Wall Street] wants to know if the Fed [Federal Reserve] is going to raise short-term interest rates higher, how well the US economy will continue to perform, and whether the US dollar will finally stabilize.''

Wall Street is mostly watching Fed Chairman Alan Greenspan who, in testimony to Congress this week, suggested that the Fed may not be doing enough to contain inflation. The Fed's Open Market Committee, which will meet on Aug. 16, may decide on another interest-rate hike.

The market ``has been in a waffling mode for some time now and it will probably continue that way into the fall,'' says Eric Morrison, vice president and director of research for Wilmington Trust Company in Wilmington, Del. Wilmington Trust, a full-service commercial bank, has assets of $11 billion under management in pension and private accounts.

``The market may be moderately higher by the end of the year, but not enough to make a fortune on,'' Mr. Morrison says. ``This is a very unforgiving market.'' His advice to investors: Be wary and stay defensive in terms of strategy.

Morrison advises investors to look for ``safe havens'' - investment sectors in which stock values hold steady or have potential for growth. Of the seven major market sectors he follows, Morrison is most upbeat about financial service companies and energy stocks, based on their favorable valuation levels. A number of financial institutions have released solid earnings reports this year, and commodity prices have been increasing.

Morrison says he also likes consumer companies that show promise of steady growth. He says the health-care sector and consumer food companies make him nervous. The health-care sector, he says, will likely remain uncertain in terms of stock gains until Congress and the White House reach a definitive compromise on a new federal health-care plan.

What does seem certain is that the US economy will continue to expand, although at a slower pace than in past months. ``We see no recession this year,'' says John Levinson, senior vice president with Lynch & Mayer Inc., an institutional money management firm in New York with assets of $5.5 billion under management.

``I'm not thinking as optimistically as I was'' about the growth of the market, Mr. Levinson says. Still, he says he thinks the economy and stock market will continue to expand during 1994. Even if that doesn't happen and the market slumps in a bear market, Levinson says he remains convinced that investors can profit from selective stock purchases. Lynch & Mayer's strategy, Levinson says, is to look for growth stocks. He adds that the personal computer sector is one that should do well.

William Newman and Jerrold Mulder, investment strategists for investment house Kidder, Peabody & Co. in New York, also like technology stocks. In a new study, the two strategists conclude that the sector appears ready to resume a market rally, despite some recent sell-offs.

But looking at the overall market, Newman and Mulder hold that the market turndown, or correction, that has characterized the first half of 1994 is not over. The stock market, they report, will continue to be volatile, with downward pressure on share prices during the second half of 1994. The Clinton administration will move to the right politically in order to shore up ``a failing presidency,'' they conclude. According to Newman and Mulder, that rightward tilt will be the ``catalyst'' for an improved equity market.

The all-time high for the market, as measured by the Dow, occurred on Jan. 31, 1994, when the market reached 3,978.36 points. Since then, the market has generally been heading southward, with the Dow now in the 3,700 point range.