Northwest Stocks Beat National Market

INVESTORS in the United States and overseas roared back into global stock markets following the collapse of last week's Soviet coup. Investment managers are ecstatic and anticipate another rising market - at least for some days.In the US, the Dow Jones industrial average once again broke through the 3,000 point level. Many of the gainers are stocks linked to foreign trade, Eastern Europe, and the Soviet Union. Here in the Northwest, a similar pattern prevailed in the market rebound. Defense-related stocks, which jumped upward at the beginning of last week's coup attempt, dipped slightly; trade-related issues, such as the Boeing Company, posted gains. Stocks of companies in the region have been outperforming the national stock market. They have been bolstered by a diversified and steady economy and a huge influx of newcomers - families moving in from other parts of the US plus immigrants from abroad, particularly Asia. The Murphey Favre index of 50 Pacific Northwest companies, a closely followed regional index, has beat both the Dow and the Standard & Poor's 500 index this year. The Composite Northwest 50 Fund, a local mutual fund that mirrors the Murphey Favre index, posted gains of about 36 percent from the start of the year to the time of the Soviet coup. That compares to about a 20 percent gain for the S&P 500, says Mark Byl, senior portfolio manager for the fund. Because of the area's heavy dependence on only one or two major economic sectors, including aircraft manufacturing, the Northwest used to be harder hit than the rest of the US in a recession. The region now tends to do better than the rest of the nation during an economic downturn. "During the 1980s, the region became highly diversified," explains Mr. Byl. Jet aircraft production (which essentially means Boeing) and timber and forest products are still key sectors. But new jobs are being created. Washington State is now home for the third-largest contingent of computer software workers in the US, exceeded only by Massachusetts and California. Many work for Microsoft Corporation, near Seattle. Moreover, "20 percent of all people in the Northwest have some link to international trade ," says Byl. That's a plus, since US exports have held their own throughout the recession. Economic growth has slowed from its boom years. "We were growing at a rate of about 4 percent in real terms from 1988 to the first quarter of 1990; now we're growing at a rate of about 1.5 percent," Byl notes. The Northwest continues to be one of the few parts of the US turning in consistent growth, after inflation. The Northwest "hasn't suffered the overall economic weaknesses of the rest of the United States," says James McColley, who heads up the Seattle offices of Piper Jaffray & Hopwood Inc., an investment house. Boeing, the region's largest industrial employer, has been somewhat of a laggard in terms of stock performance. But aircraft orders continue to pour in. The company just posted its best-ever profits for the second quarter - $454 million, an increase of 17.3 percent over the year-earlier period. The real estate market has been strong, says Mr. McColley, and "we're starting to see a turnaround for the forest products area." That was one local industry hit hard by the slowdown in construction resulting from the national recession. Douglas Reilly, manager of the offices of A. G. Edwards & Sons Inc., in Edmonds, a suburb north of Seattle, notes, "the housing market here never got too far ahead of itself, as happened in California," where real estate prices have fallen off considerably. Local corporations, moreover, stayed relatively lean during the 1980s, whereas many US companies added to their payrolls and were then forced to cut back severely during the recession. The local economy has slowed somewhat in recent weeks, says Robert Chase, research director for the Pacific Northwest Quarterly, an economics journal. Still, Mr. Chase expects manufacturing employment growth to be around 2 percent for the rest of this year, and then rise to 3 to 3.5 percent for 1992.