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Online Extra: Taking a Turn With Tech

Of the 80 strategists we polled in our survey of the equity markets this year, plenty were willing to bet that the current bull run is far from over. The consensus put the Nasdaq Composite at 2,647, and most chose technology as their favorite sector. Why? It depends on whom you ask. Ralph Acampora, director of technical research for Knight Equity Markets, says it's fickle taste. "This industry is like the fashion industry. Certain sectors go in and out of style with investors," he says. Now it's tech's turn.

One of three forecasters predicting a yearend close of 3,000 (a 23% advance as of Dec. 12), Acampora believes that tech stocks are about to have their day. "When the bull market started in 2002, people were very unhappy with technology," he says. As a result, those stocks have been "under-loved and under-owned for the last four years."

This means opportunity for investors. To illustrate the point, total returns for Acampora's 2006 stock, Akamai Technologies, were up 171% for the past 12 months, outdistancing most, if not all, other stock picks on our survey.

Time for an Upgrade James Wong, senior vice-president and a co-portfolio manager of Los Angeles-based investment firm Payden & Rygel, is bullish on the Nasdaq, too. He says in an environment where most people are anticipating an economic slowdown, some are going to be looking for quality, large-cap stocks or growth stocks, such as Microsoft, to provide steady earnings.

The biggest spender, however, will not be the consumer, but Corporate America. "Companies are sitting on record amounts of cash. We haven't had PC upgrades in a long time, and [Microsoft's new operating system] Vista could be the catalyst that we need," he says.

For John Katter, chief investment officer of Boston-based Eastern Investment Advisors, tech stocks are a bargain relative to interest rates. He calculates that stocks were the cheapest they had been in about 30 years when they hit lows this summer. That should attract buyers, but he cautions that the coming year will have lots of ups and downs. He also expects interest rates to increase and the growth rate of the market to slow. Long term, "we think the markets will be fine," he says. For now, he's bullish on the Nasdaq, Dow, and S&P. So is Acampora.

History Lesson A part-time instructor for nearly 40 years at the New York Institute of Finance, Acampora looks at historic precedents to teach his students about trends in the markets—and to back his bullishness going into 2007. He argues that the economy fares best during the third year of a presidential term, such as next year, and that there have been nine periods of 32% average gains since Ford replaced Nixon in 1974.

Could 2007 be the year of the Nasdaq? Maybe—as long as tech stocks don't trip on their way down the fashion runway. By Bremen Leak

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