Stock market will rally in 2008: Evergreen

By Walden Siew

NEW YORK (Reuters) - The U.S. stock market will rally in the second half of 2008 and robust corporate bond issuance means the U.S. economy is "on solid footing," a senior fund manager at Evergreen Investments said on Tuesday.

While the U.S. housing and credit crisis has roiled global financial markets, the Nasdaq .IXIC is up more than 12 percent year-to-date, the Dow .DJI gained 10 percent and the Standard & Poor's 500 index .SPX is up nearly 7 percent.

"We're at the beginning of our year-end rally, and I think that history will favor financial markets and equity markets next year," Margaret Patel, a senior portfolio manager at Evergreen Investments in Boston, said at the Reuters Investment Outlook 2008 Summit in New York.

Patel, who forecasts a "very strong finish" in 2008, oversees about $1.4 billion in assets, including mostly stocks and some high-yield debt.

"As we get into next year, we will work through and be halfway through the subprime financial correction cycle, and that will set us up for an acceleration of growth," Patel said.

The subprime mortgage crisis and the resulting credit crunch have resulted in billions of dollars in write-downs at major financial companies this year.

Sales of investment-grade U.S. corporate bonds surpassed a yearly record last week, hitting $944.5 billion, up from $936.6 billion in all of 2006, according to Thomson Financial data.

Those sales suggest companies are borrowing to invest in future expenditures and acquisitions, Patel said.  Continued...