January jolt another chance to buy

And that’s what they’re hearing from their clients who clearly disbelieve the old saw that January sets the tone for the year. In fact, many clients saw January not as a warning, but as a buying opportunity — and perhaps that’s scary.

Despite plunges last month by the Dow Jones Industrial Average, the S&P 500, and the Nasdaq indexes — which fell a respective 4.8%, 5.1%, and 4%, the worst January performance in a decade — both advisers and their clients remain almost startlingly optimistic about the strength and stability of the stock markets.

“We really like volatility, given how the markets have performed over the last five years,” says Jon Kuhn of Allegheny Financial Group in Pittsburgh. “It provides great buying opportunities.”

Indeed, the survey suggests that low inflation, a recovering global economy, positive corporate earnings and the efficiencies continuously being introduced by technological advances have the adviser industry feeling overwhelmingly bullish about 2000. They think it will be at worst a slow growth year and at best exceed last year’s performance.

Even last month’s quarter-point interest-rate rise seemed not to concern advisers, who largely view the Federal Reserve’s move as necessary.

Their only concern seems to be their clients’ growing zeal for the market’s gyrations, which have come to represent for them not doom and gloom but golden opportunities to shop.

Much of the optimism centers on the concept that the so-called New Economy has taken over.

History might have shown there is validity in the comment about January, says Glenn Woody, a Costa Mesa, Calif., adviser. “Still, I think we’re in a new era now, and I don’t see any major clouds coming over the horizon.”

“We’re in unprecedented times right now,” says Tom Lydon, principal of Global Trends Investments in Newport Beach, Calif., echoing Mr. Woody’s sentiment. “Unless there are any surprises, this thing is going to continue to move forward and up.”

Even possible future interest rate hikes aren’t diminishing advisers’ enthusiasm.

“I think they’ll hit 7%,” says Mr. Lydon, “but with the expanded growth and the shape of the economy right now, individuals and corporations can stand those levels.”

Scott Hanson, an adviser with Hanson McClaine Retirement Network in Sacramento, Calif., sounds equally unconcerned. “I’d say long-term interest rates won’t increase a whole lot beyond 6.5% because I don’t see that inflation will be a big enough problem to push them any higher.”

Some see a drop

Some advisers even expect interest rates to drop in the second half of the year.

“The health of the economy is very strong,” says Darla Main, an adviser with IFG Network Securities in Pittsburgh, “and that, by definition, will keep interest rates low.”

“The only inflationary pressure we have to deal with is labor,” notes David Diesslin of Diesslin & Associates in Fort Worth, Texas. “But technology is enhancing productivity to neutralize that on most fronts, so I think rates will move lower.”

In fact, one of the few concerns voiced about possible rate hikes, or cuts, is that the Federal Reserve’s involvement prevents the market from self-correcting.

Says Irwin Rothenberg, president of advisory firm Wealth Management Consultants in Santa Rosa, Calif.: “It’s not a bad thing the Fed is trying to do. On the other hand, I’d rather see the market make its own adjustment,” to temper its wild growth. “With the Fed tweaking it, it can’t.”

Because most advisers expect this year to be as good as 1999, the majority aren’t making dramatic changes to clients’ portfolios, even those whose holdings are heavily concentrated in growth and technology stocks.

“We’re still maintaining a strong growth stock orientation,” says Aspen, Colo.-based adviser Wally Obermeyer. “We had fabulous returns last year, so in general, our clients want to increase those equity allocations in their accounts.”

“I’m pretty bullish and sticking with the big blue chips, as well as some tech stocks that were hit last month like Cisco Systems, Sun Microsystems, EMC,” says David Citron of Wagner Citron Management Corp. in Baltimore.

“I just don’t see reason to change over what we did last year at this point,” he continues. “Maybe fear levels are up a little higher so downside swings will be a bit more severe, but there’s a tremendous amount of liquidity in the market pushing it up.”

But not everyone is throwing caution to the wind. While Chris Hauswirth, an adviser with Wetherby Asset Management in San Francisco, acknowledges that technology and growth stocks are a great place to invest long term, he’s increasingly trying to fight the insistence of his clients that he not spread money across more asset classes.

“In our opinion, this is the time you need diversification,” he says. “I know the argument that historical observations are becoming obsolete. But I have a hard time believing that history doesn’t matter.”

Besides, says Greg Welbourn, an adviser with First Financial Consulting in Pasadena, it’s unhealthy for investors not to be diversified. “Conservative clients don’t like overinvesting in one sector, even tech, and aggressive people get very nervous on the downside.”

Debbie Silversmith, an adviser with Sterling Partners in Denver, says she is keeping the largest part of her clients’ investments in large- cap, as well as in international markets moving toward greater profitability, like Europe.

Go-go grandmoms in action

But she, too, says even her most staid clients are becoming surprisingly emphatic about where they’re invested.

“People whose risk profile was certainly not oriented toward no-earnings, startup-type companies are calling up and asking if we shouldn’t put some more money into these go-go Nasdaq names. It’s crazy.”

Indeed, says James Brown of Independence Advisers in Berwyn, Pa., “We’re selling out of some tech and buying more value, but it requires a whole lot of discipline. Investors are so emotionally involved right now in wanting to participate more in certain stocks. It’s irrational.”

Rob Rikoon, an adviser in Santa Fe, N.M., says his clients are even scarier. They aren’t calling at all. “It’s a bad sign,” he says. “They’re so blase; everyone expects the market to bounce back up like it has the last six or seven years.”

While he is largely optimistic about this year, he thinks this clients may well be what he calls a “contraindicator. When they all want to buy,” he says, “that’s the time to sell.”

Scott Leonard, an adviser at Leonard Capital Management in El Segundo, Calif., is already predicting some market shocks, one of the few advisers to do so. “I bet we’re going to see a huge downturn in high-tech related issues within the next 18 months.’