Shares of global investment banks, including Citigroup Inc. and J.P. Morgan & Co., could hit 12-month highs this fall, but thereafter the prospect of a bear market looms, according to a veteran Wall Street analyst.

"It appears the best chance of making money in these stocks is near term, rather than long term," said Raphael Soifer of Brown Brothers, Harriman & Co. in New York.

A bear market -- a prolonged period of falling stock prices -- "would be bad news indeed for investment banking and related stocks," he said, because these stocks tend to decline more than the overall market in a poor investment climate.

The prospect of new highs for these large banks is based on the reaction of investors to the Federal Reserve's two summer rate hikes, which generated significant market "relief rallies." Moreover, most economists think the Fed will probably not raise rates beyond October, because of concerns about year-2000 problems.

But bank stocks overall show few signs of breaking out of the slump they have endured since the Federal Reserve began raising short-term interest rates. On Tuesday the Standard & Poor's bank stock index fell another 2.2%. Katrina Blecher, the regional bank analyst at Brown Brothers, said she is cautious on the outlook for the industry, as do several other observers.

Despite Mr. Soifer's wariness about the long term, he sounds far more optimistic about the short term than most other analysts.

"It could be that the bloom is finally off the rose" for banks, said John D. Rooney Jr., an analyst in New Haven, Conn., for Legg Mason Inc. As for the market in general, he said, "a subtle change in psychology may be underway." He said he sees a chance of additional downside pressure on banks that have moved toward investment banking, such as Chase Manhattan Corp.

"We see no catalyst to cause us to become more bullish on the banking sector for the remainder of the year," analysts at Janney Montgomery Scott in Philadelphia said in a recent report to clients. They do see some possible bright spots next year.

The most bearish observer is probably Charles Peabody of Mitchell Securities Inc. in New York, who said Tuesday that bank stocks could "go down 60% to 80%" because of credit quality and other problems in a changed economic environment.

He spoke at a conference sponsored by David W. Tice & Associates of Dallas, which manages the Prudent Bear Fund. The group of investment firms tracked by Mr. Soifer includes Citigroup, Chase, Merrill Lynch & Co., Lehman Brothers, and Morgan Stanley Dean Witter, all of which he recommends, plus Morgan, Goldman Sachs Group and Donaldson Lufkin & Jenrette Securities Corp.

He recently reversed his ratings on favored stocks in the group to "short-term buy" and "long-term neutral," but said that a bear market scenario would dictate moving to a defensive investment posture. That would mean "emphasizing comparatively stable, fee-income-dependent issues such as U.S. Trust Co." and possibly foreign stocks.

He noted that Chase Manhattan shares have recently traded more like those of an investment bank. "In our view, this reflects the evolving nature of Chase's business mix," he said. In the first six months of the year, Chase's global banking sector produced 65% of the bank's cash operating earnings before adjustments.

Mr. Soifer said the change in outlook is not so much related to the outlook for the companies themselves, but is a "market call," because the stocks track the general market -- with greater extremes on both the upside and downside.

Last week Brown Brothers' chief market strategist, Charles H. Blood Jr., updated his scenario for clients:

"The latest smoke signals from the Fed seem to suggest that the Federal Open Market Committee may leave rates unchanged at the Oct 5 meeting. We are not completely convinced.

"Even under the assumption that recent economic data give the Fed room to wait, it can also be argued that the strong momentum in domestic consumption could be grounds for unwinding the last of 1998's easing moves," he said. "The economy remains in a consumption boom fueled by last year's easier monetary policy, explosive money supply growth, and large increases in liquidity."

Mr. Blood said he recognized that this is "not a widely held view either inside or outside the Fed." The Fed could split the difference at its next meeting by holding rates steady and adopting a "tightening bias" in policy, he said. But the Brown Brothers strategists added, "Our concern about an approaching bear market in stocks continues to grow."

"In our view, a Fed rate hike on Oct 5 would increase the chances of a sharp drop in October, however we think leaving rates unchanged would not be enough to resurrect a healthy bull market," Mr. Blood said. "The tides of declining liquidity and poor technical action are running against the stock market."

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