Market Trends Suggest Saving Is King Banks, Hi-Tech Outdo Stocks Of Companies That Sell Consumer Products

Saving money is in, and spending money is out, to judge by the behavior of the stock market in the first half of 1995.

Stocks of Wall Street firms, banks and savings institutions that sell investment products and moneymanagement services scored many of the strongest gains from January through June as the market climbed to record highs.

At the same time, consumer stocks, such as in the apparel and specialty retail industries, were some of the most notable laggards.

The best performer of all, technology, continued the dominance it enjoyed in 1994.

Technology at times produces traditional consumer products - after all, personal computers are favorite new toys in millions of U.S. households.

But it also represents an investment, with a declining cost per unit of benefit that is saving many businesses and other organizations money, and helping to encourage the start-up of countless new enterprises.

Going into the last week of June, Dow Jones’s composite of 13 technology stock groups boasted a gain of almost 33 percent since New Year’s - led by semiconductor stocks, which racked up a 101 percent advance.

The financial composite of 14 groups in banking, brokerage, insurance and related fields was up more than 27 percent.

By contrast, the composite of 23 cyclical consumer groups, ranging from airlines to toys, rose just 15 percent.

And within that category, apparel and fabric makers and specialty retailers actually declined a bit, faced with an increasingly reluctant breed of customer.

In the view of some analysts, this preference for investment businesses over consumer businesses marks a budding theme that could have a long run on Wall Street.

Edward Yardeni, chief economist at C.J. Lawrence Deutsche Bank Securities Corp. in New York, argues that major economic patterns of the 1980s, including “the buying binge of baby-boom yuppies,” have now reversed dramatically.

As they approach and pass age 50, the argument goes, this huge generation will put more and more emphasis on savings and investment over spending, whether its members like the idea or not, because they see a pressing need to plan for their older years.

In keeping with the theme, moves to shrink the government budget deficit stand to crimp spending, by bringing the corporate “restructuring” of the past 10 years to government as well.

“There are 19 million people working for the federal, state and local governments,” Yardeni says.

Most analysts view the prospects of budgetbalancing in Washington and an increase in the U.S. savings rate as powerful long-term positives for the economy and the markets.

But they also see potential bumps along the way that could give stocks some bad moments. Eliminate deficit spending by Uncle Sam, they note, and you take away a powerful source of stimulus for the economy and corporate profits.

In addition, they say, as events keep bringing more and more money into the financial markets, through mutual funds and other avenues, the process is unlikely to be completely smooth.

Over the past three years, the stock market has been much less volatile than it was over most of its previous history.

With the Dow Jones industrial average above 4,000, a 25 percent move would translate into more than 1,000 points.

So if the market’s ups and downs ever revert to their former norms, Americans’ growing taste for investments will be put to a kind of trial they haven’t experienced in some time.