Art & Commerce

Stock Answers
The stock market can sometimes predict business conditions. With the Dow Jones 15 percent below its mid-July peak, what message is coming from Wall Street? That business may slow down. We’ve seen signals from some companies that financial results will be poorer than once expected–and some are lowering costs (read: layoffs). Whatever the spin, this is not good news for the ad industry, even though the leading agency companies remain on track for a banner 1998. The worry is that clients may slash ad budgets for 1999. The stocks of the top client companies have fared better, on average, than the shares of the leading ad agencies. Two of the client stocks are up in price, and one, though down, has beaten the Dow; the agencies are crammed in the cellar in part because these client companies have large market capitalizations and investors flock to the large “caps” in times of turmoil. But investors may have missed the shift toward multinational, multidiscipline operations at the agency-based companies, which could give their profits a new measure of durability. –Alan Gottesman (westendal is principal of West End Consulting.
The largest companies in each of the largest ad categories have fared better than the ad agencies since the stock market’s peak.
7/17/98 10/14/98* Change
Philip Morris 39.63 48.32 21.9%
Johnson & Johnson 77.56 78.94 1.8%
Procter & Gamble 90.50 79.48 -12.2%
General Motors 68.88 52.81 -23.3%
Sears 58.48 39.94 -31.7%
Dow Industrials 9367.84 7958.14 -15.0%
Interpublic 62.44 49.13 -21.3%
Omnicom 54.88 43.25 -21.2%
True North 32.06 19.75 -38.4%
WPP Group 73.63 45.25 -38.5%
Young & Rubicam 35.63 22.38 -37.2%
Source: West End Research. *10/14/98 prices are intraday.

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