Experts Expect Mundane Stock Market For Mutual Fund Investors

- Alan Lavine and Gail Liberman

That's the word from William Wilby, director of equities at OppenheimerFunds Inc., New York. He says supply and demand factors are pointing to lower oil prices. Lower oil prices should translate into lower inflation and increased economic activity.

Lower inflation also is good for bond prices. Reason: Bonds hold their purchasing power.

"We do not think that oil prices will hold at their current levels for very long," Wilby said. "Moreover, we are perhaps in the early stages of a minor oil-induced slowdown in world growth, which could take some of the upward pressure off interest rates. This could bode well for stock prices over the next six to nine months."

Although oil stocks may do well, the overall stock market could be sluggish, says David Wyss, chief economist at Standard & Poor's, New York. Wyss, who spoke at a recent Fidelity Investments conference in Palm Beach, Fla., said we could see single-digit returns in the stock market for some time. Reasons: Higher interest rates, high oil prices, a huge U.S. government deficit and a weak dollar.

Overall, the economy is growing due to strong productivity, he said. As a result, inflation should not present a major problem for investors.

Robert Doll, chief investment officer at Merrill Lynch, New York, said that economic growth is slowing. But slowing growth should keep interest rates from rising too high.

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Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books). Al and Gail's new book is Rags to Retirement, (Alpha Books).