Despite last week's wild ride in stocks, including bank shares, Wall Street's leading bulls are refusing to pull in their horns.
Ralph J. Acampora, director of technical research at Prudential Securities Inc., said he continues to expect a 10,000-point milestone for the Dow Jones industrial average, but next year rather than this month as previously predicted.
Similarly, Craig Callahan, president and chief investment officer of Meridian Investment, Englewood, Colo., says the Dow will probably reach the 10,000 mark by early 1999 and top 15,000 by 2002.
Mr. Callahan said he remains unfazed by last week's gyrations. In fact, he recently moved up his prediction of a 10,000 Dow to 1999, from 2000.
Strategist Elaine M. Garzaralli, who gained fame for predicting the 1987 stock market crash, also remains a steadfast bull.
Ms. Garzarelli said she continues to see prospects for a substantial upside in the market-and is still bullish on regional banks, according to her assistant, Alida Melkonian.
The bulls continue to see a benign economic climate, enhancing growth prospects for equities.
The stock market, and bank stocks, will continue to climb because inflation and interest rates are likely to remain low, Ms. Garzarelli wrote in a recent report.
"We are not convinced that the Fed will raise interest rates again in this cycle," Ms. Garzarelli wrote. "The dampening effect of the Asian economic problems will likely provide the moderating influence required to cool the economy."
Reinforcing the prospect of low inflation, traditional indicators such as gold and lumber prices continue to be extraordinarily tame, while the dollar remains strong.
"Some margin squeeze for corporations is likely," Ms. Garzarelli wrote. "Not price increases."
Nor do the bulls see the stocks as overvalued and ripe for a significant correction.
"The so-called exceptional bull market since 1982 is very proper and rational," said Mr. Callahan, who emphasized that his analysis is based on the classic valuation models developed by renowned investor Benjamin Graham and "adjusted for today's market conditions."
Meridian's model takes into account historic earnings averages, projected growth rates, beta coefficients-which measure stocks' relatively volatility-and the yield on AAA-rated bonds.
Mr. Callahan noted that earnings have grown over the last 16 years in a disinflationary environment of falling interest rates, making it "entirely logical that the fair value of stock prices has grown."
If current conditions persist, "the Dow will reach 10,000 by 1999 at the latest," he said.
According to the Meridian valuation model, stock prices are about 2% over fair value, said Mr. Callahan, who says he expects most stocks to be 11% to 12% higher in value a year from now.
Of course, "investor emotions and events" can interrupt market trends, he added.
Bryan M. Ritz, Meridian's portfolio manager for financial services companies, thinks bank stocks in particular are on a roll.
"Most bank stocks are expensive relative to the market," explained Mr. Ritz, who described himself as a long-term bull. "However, if interest rates continue to go down, they will do well." Another attractive quality about the regional banks is that they have no exposure to Asia, he said.
"I just don't see a lot of downside," Mr. Ritz said. "People overreacted to Asia. This trading range in the market is really normal. The reason why people are concerned is because for the last three years, the market has just gone up, up, up."
