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Kim Goodwin: How Last Year's Ace Sees 2005

It was a pretty good year for our market strategists, but C. Kim Goodwin was the best. The chief investment officer for equities at Boston's State Street Research & Management Co. figured that, with corporate profits rising and the economic recovery taking root, 2004 stock market gains would be moderate. But she didn't expect that the big rally would come only after the Presidential election. "We had four quarters in a row of more than 20% corporate profit [growth], so I was surprised the markets weren't moving," she says.

The markets sure did catch up with her. Goodwin topped 65 other strategists in BusinessWeek's 2004 market forecast, all but nailing the Dow Jones industrial average, the Standard and Poor's 500-stock index, and the NASDAQ Composite. When we called the winner on Dec. 3, she was 1% over the Dow, 0.75% over the S&P, and less than 0.1% off the NASDAQ. She beat a prescient bunch: 35 others came within 5% overall.

Goodwin, 45, doesn't latch on to companies with a nice story to tell, favoring metrics such as inventory levels and per-customer revenue to arrive at unemotional investment decisions. That philosophy helped as she cut her teeth as a technology analyst with Mellon Bank after masters degrees in business and public affairs at the University of Texas at Austin. It also helped that she "likes roller coasters," she says.

Indeed, it has been a something of a winding road for the Omaha native, whose first exposure to the financial world came by watching Louis Rukeyser's TV show as a kid. She went to Princeton University in the '70s thinking she might become an architect. It was there she first learned about investing, after getting involved in a student group urging the university to divest businesses with ties to South Africa's then-apartheid regime from its portfolio. "I really learned to do investment research as an undergrad looking through annual reports," Goodwin says. Must have worked: She ended up a regular guest on Rukeyser's show.

Goodwin's crystal ball shows a more subdued year ahead, as inflationary pressures, exacerbated by a weak dollar, could hinder growth. "I think that [the yearend rally] will extend through the first quarter of 2005," she says. "But then I'm a little concerned that as interest rates pick up, you can see that recovery sputter a bit." She calls for a Dow finish of 10,900, 1,250 for the S&P, and 2,210 for the NASDAQ. That's near the low end of the market forecasters we polled this year. But she's simply going where the numbers tell her to.

By Brian Hindo in New York

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