Investment experts not alarmed by slump

SOUTH BEND -- Investors should not be overly concerned about declines in stock market averages in recent days, according to three local investment professionals.

One of the three, Frank Reilly, even views the recent stock market slide as a buying opportunity.

Reilly is a professor of finance in the Mendoza College of Business at the University of Notre Dame. He is also the co-author of two widely used textbooks on investing.

"Unless you have a strong reason to do so, I would not be selling at this time," said Reilly.

He noted that the prices of many individual stocks have declined 5 to 10 percent in recent weeks.

Reilly advised investors to stick with stocks they know and perhaps consider purchasing some that were attractive but too pricey in the past.

"Find something you like and take this as an opportunity to buy," he said.

Two other investment professionals said despite the performance of the stock market this week, the long-term economic outlook remains bright.

The short term performance of the U.S. stock market "certainly has been disappointing," said Peter Rumely, senior vice president with Smith Barney Inc.

Speaking from his office in South Bend, Rumely said the stock market is reflecting investors' concerns the U.S. economy is slowing down and that interest rates are edging upward.

But he said the long-term outlook for stocks remains bright because corporate earnings remain strong, in the range of 9 to 10 percent growth over the year.

At this rate of growth, earnings would double within eight to nine years.

"As companies increase their earnings, in the long term the stock price will reflect that," said Rumely.

He has been advising clients on investments for 36 years and sees the recent stock market performance as "all a part of the long-term cycle."

Fred Kahn, first vice president with Merrill Lynch, said the market might be repeating last year's performance.

Kahn, a financial adviser in Merrill Lynch's South Bend office, said the stock market has been slowing in the past few weeks from what had been a strong beginning.

Last year the market also performed well in January, February and through most of March, only to go into a tailspin for several months.

But things picked up so well toward the end of the year that 2004 turned out to be a good year overall for stock investors.

"We've been through this before," said Kahn, stressing that the market trend over the past 80 years has been upward.

"For a few weeks or months things look gloomy but then things tend to work out well," he said. 

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