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Thursday, Nov 30, 2023

Finance — Stocks Down, But Interest Rates Are Leveling Out

Local Venture Capital

Investments Dramatically

Increasing Over ’99

With nearly all of the domestic stock market indices down since the beginning of the year, the Federal Reserve’s interest rate tightening is having its expected effect, two local stock market experts agree.

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Since Dec. 31, the Dow Jones industrial average has declined about 10 percent; the Standard & Poor’s 500 stock average has dipped 6 percent; and the Nasdaq composite index has fallen 21 percent.

However, whether the decline in stock market prices is merely a correction in a long-running bull market that started in the mid-1980s or a full-fledged bear market, the stock watchers disagree.

“As far as I’m concerned, it’s still too early to tell,” said Bud Leedom, publisher of the San Diego Stock Report.

Craig D. Allen, a vice president at First Union Securities in University Towne Centre, disagrees.

“I think you’d have to say by the indices that we’ve been in a bear market over the past few months,” Allen said. “But if you look at the 1929 crash you had a 20-25 percent drop in stock prices in a two-day period and in 1987 we had a 23 percent drop in one day.”

While neither of them sees any more interest rate increases, they also didn’t see rates coming down for at least the next several months.

They were divided on where the best places to invest are right now.

Leedom saw opportunity in real estate investment trusts with their high-dividend yields. Pharmaceuticals, food companies and restaurant stocks also have promise at this time, he said.

“The Dow Jones utility index has also been doing very well recently,” Leedom added.

Allen foresees an election-eve rally later this year.

“You have to own technology, Internet and telecommunications,” Allen said. “Those are the three areas of the market growth investors should focus on.”

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Venturesome Capital: Venture capital firms invested $411 million in the first quarter in 41 San Diego companies, PriceWaterhouseCoopers reports.

“First quarter venture investments in San Diego increased 191 percent over the $141 invested in the first quarter of 1999,” said Jim Ingraham, a partner with the PriceWaterhouseCoopers Technology Industry Group. “This is a phenomenal amount of capital flowing into our entrepreneurial technology economy.”

The funds invested were 3 percent more than the $399 million invested in local companies during the fourth quarter of 1999, he added.

Nationally, venture-backed investment increased to $17.2 billion in the first quarter, a gain of 17 percent over the previous quarter, Ingraham said.

Life science industries such as medical device, health care services, pharmaceuticals and biotechnology had the strongest growth by securing $186 million in funds, an increase of 33 percent over fourth quarter 1999.

Business services firms also recorded a sharp increase in investment, rising to $113 million in the first quarter. That’s an increase of 216 percent from the fourth quarter.

“The business services sector continues to reflect the ability of E-commerce companies to attract financing,” said Kyle Marson, a PriceWaterhouseCoopers associate. “In fact the first quarter investment in the business services sector is entirely attributable to the Internet-related companies that account for 95 percent of the investment in this category.”

Profits Increase: El Cajon-headquartered Cuyamaca Bank reported a 14 percent increase in after-tax profits for the first quarter, compared to the first quarter of 1999.

The bank earned $49,000 and also increased its assets to $60.9 million, a 15 percent increase over the first quarter of 1999, said Bruce Ives, president and CEO.

Ives was named president and CEO of the bank in October 1999.

Send banking and finance news to Art Grupe at agrupe@sdbj.com.


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