Brokerage, Other Financial Stocks Top Market

And the winner of the Wall Street award for top-performing stock group of 1997 is - Wall Street!

Yes indeed, American investors, the best money-making idea your brokerage firm could have suggested to you in the year now past might well have been its own publicly traded shares.

Dow Jones & Co.’s gauge of securities brokerage stocks sported a gain for the year of 80 percent. That put the brokers in the No. 1 spot among 96 industry groups tracked by the publishing and financial-information company.

It’s not hard to see why that happened - with a year of record trading volume in the nation’s securities marketplaces and of continued strong growth in businesses like managing mutual funds and raising capital for corporations.

“Since 1994, profits for this group have reached stratospheric levels, and share prices have, not surprisingly, soared,” notes Andrew Colonna, an analyst at the Value Line Investment Survey, in the research firm’s latest appraisal of the securities industry. “In fact, brokerage equities have been among the market leaders during the the entire 1990s bull run.”

Five other industry groups in the Top 10 for the year also came from the financial sector - savings and loans, No. 2 with a 71 percent gain; Eastern banks, No. 4 with a 58 percent rise; banks from the central section of the country, No. 5 with a 55 percent advance; diversified financial services, No. 7 with a 54 percent gain, and the regional banks composite, in 10th place with a 50 percent rise.

All benefited from the long-running investment boom, relatively low interest rates, and the good news on inflation that has helped enhance the appeal of stocks, bonds and other paper investments.

The flip side of the prosperity enjoyed by those securities has been severe downward pressure on gold and other precious metals investments as investors, including many of the world’s central banks, saw fewer and fewer reasons to own inflation hedges. Dow Jones’s precious metals index tumbled 33 percent to rank dead last among the industry groups.

Other notable losers for the year included steel, nonferrous metals and diversified mining stocks, hurt by a general weakness in commodity prices.

Of course, many of the year’s most spectacular losses occurred not among any U.S. stocks, but in Pacific Basin markets hit by the Asian financial crisis.

Country funds specializing in markets like Thailand, Korea and Indonesia suffered drops of more than 50 percent.