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Bank of Oklahoma Chief Investment Officer Foresees Steady Growth

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Journal Record - Oklahoma City
By Kirby Lee Davis
December 27, 2005

Trepidation weighs upon many national stock market analysts as they prepare to enter 2006. Not so Jim Huntzinger, who oversees $15 billion in investments for BOK Financial.

While the chief investment officer for Bank of Oklahoma's parent remains concerned over upcoming Federal Reserve actions, he expects continued low inflation and consistent economic growth will ensure solid returns for equities.

I think the prospects are good in 2006, he said. We're modest about our expectations for the equities market next year, about 7 percent for the whole year for the S&P 500, but we may be light on that number.

That would improve on 2005 - which was disappointing, without hindsight.

It was not as good as people originally thought it would be, Huntzinger said. In mid-December last year we were expecting 7 to 8 percent growth.

He expects the year to end within the neighborhood of 5 percent growth.

But if you had told me sometime at the end of 2004 that the Fed would have raised interest rates five times, and that oil was going to hit $60 a barrel and that we'd have two devastating hurricanes, I would have probably gone to cash through all the markets, thinking that we were going to get hammered. But that's not what happened. So, overall, I'm pretty satisfied by the way things turned out.

It also points to a good lesson: Don't rush to judgment when major events shake the markets.

Form a good game plan on investments and stick to it, he said. It's especially true that you should not overreact to events such as these, because more than likely your initial reaction is going to be wrong.

His cautious optimism counters some national analysts.

What's going to get it really moving on the upside? A lot of the factors that would get things moving have already occurred, said Tim Hayes, global stock strategist at Ned Davis Research in Venice, Fla. Now we're vulnerable to disappointment.

Milton Ezrati, a senior economic strategist at the money management firm Lord Abbett, pointed to investor fears as a caution for 2006.

The fundamentals have been superb, earnings have been above expectations, corporations are swimming in money, he told The Associated Press. But we have a litany of fears that have affected and infected investors.

Huntzinger acknowledged some of that, noting the brief upsurge in stocks after Ben Bernanke was named Alan Greenspan's likely replacement as Fed chairman. He agreed with Hayes that an early 2006 end to interest rate hikes is already priced into the market. But he disagreed that stocks have little room for growth.

Once we get the Fed out of the way, probably at the end of the first quarter, the equity market can do better, he said.

The BOK guru expects a 25-basis-point rate hike from the January Federal Reserve Open Market Committee meeting, the last Greenspan will lead. He foresees another one in March, Bernake's first with the gavel.

I think that will be all we'll get, he said. I think that's critical to our forecast for a better market in '06.

Those moves would come on top of this year's Fed efforts to rein in inflation. The Consumer Price Index (excluding energy and food costs) stood at 2.1 percent through November.

I do have concerns if the Fed overdoes it, he said. If it continues to raise rates after March, Huntzinger fears the actions could spur a slowdown in the economy. However, I don't think you're going to see a lot of change in the way the Fed behaves.

Huntzinger projects 3 to 3.5 percent economic growth in 2006, down slightly from this year's 4 percent. That falls in line with national projections of 3.3 percent growth, with continued high energy prices countered by lower consumer and corporate spending.

With signs of excess capacity somewhat offsetting continued demand in emerging economies, Huntzinger expects oil prices will trade in the $50-per-barrel range next year. This follows national projections that oil contracts may average $55 a barrel. While that stands far above the $19 oil enjoyed in the late 1990s, it remains far below the $70-plus prices seen in August.

Analysts noted much of the energy price increase has been absorbed or countered. Stephen P. Brown, an economist at the Federal Reserve Bank in Dallas, told The Associated Press that from airlines to manufacturers to retailers, we're seeing a lot of emphasis on conservation.

Huntzinger noted the challenge may come when the Organization of Petroleum Exporting Countries steps in to defend the price - especially should it drop below $50. Even so, he expects Oklahoma businesses to continue to profit from high energy prices, despite continued short-term cycles.

He also expects hurricane recovery efforts will positively impact national economic growth.

Huntzinger, executive vice president and chief investment officer for Tulsa-based BOK Financial and its six bank subsidiaries, joined Bank of Oklahoma in 1982. Appointed chief investment officer of the BOK Trust Division in 1992, he claimed his current title a decade later. His duties include management of the Trust Investment Management Group, Capital Markets funding operation for the corporation, the bank's investment portfolio and various asset and liability management duties.

He is a member of the Tulsa Community College Foundation Board, the San Miguel School of Tulsa Endowment Board and past president of the St. Bernard's Catholic Church parish council. He is a member of the Oklahoma Society of Financial Analysts and the Association for Investment Management and Research.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.