But many leading equity investors are increasingly convinced that the winning streak small- and mid-cap investors have experienced is coming to an end. From 1999 to the present both small-cap and mid-cap indexes have posted gains while the Standard & Poor's 500 Index has slipped in value.

Even within the S&P 500 itself, there has been a noticeable difference. Between 2000 and 2003, the 100 largest stocks fell 18.3% in value while the smallest 100 appreciated 48.5%, according to Wellington Management Co. "We believe that large-cap stocks will be a good place to invest over the next six to 12 months," says Brian Bruce, head of equity funds at PanAgora Asset Management.

What has been particularly striking to several experts has been the disparity between blue chip stocks since the bear market touched bottom in October 2002 or March 2003-take your pick. Since then, smaller speculative stocks soared in value, at least until this summer, while the big names moved slowly upward.

In an economic environment where growth is hard to come by and interest rates are set to rise, stock price valuations may just be a whole lot more important than they have been in a long time. Experts often say earnings and dividends are what drive stock prices.

Examined from another angle, however, one could just as easily argue that it is the contraction and expansion of price/earnings multiples that is the primary cause of changes in equity price movements. That is the view of Jonathan Golub, chief equity strategist at JP Morgan Fleming. "From 1962 to 1982, P/E multiples went from 22 to 7," Golub says. "From 1982 to 2000, they went from 7 to 30."

So if multiples drive stock prices, what drives multiples? Largely inflation and interest rates, Golub argues. In fact, earnings may be less important in determining long-term returns than many folks think. Some observers like Warren Buffett have maintained that earnings actually rose faster in the 1966-1982 period than in the 1982-1999 era.

Like many observers, Golub thinks that the market is going to have to grind out modest 6% to 8% annual returns for the next 5 to ten years. If he and the others are right and big stocks are favorably positioned at this juncture, then getting the big stocks right could be the skill that separates portfolios with superior returns from the rest.

"Large caps will grow faster because there is a global recovery and they can benefit from the [weak] dollar," says Rand Alexander, a senior equity manager at Wellington Management who also serves as manager of The Hartford Stock Fund. "The large-cap premium has disappeared in the last four or five years, and they are reasonably priced."

Another factor weighing in their favor is the potential for dividend increases. "Investors just haven't focused on it yet," Alexander says. For example, Citigroup has doubled its dividend in the last 12 months, and companies like Costco, Viacom and Microsoft have all just introduced dividends for the first time. AIG, trading at about 14 times this year's expected earnings, has raised its dividend 35% in the last year.

According to Alexander, if federal taxes on dividends remain at the current 15% level, the payout ratio on the S&P 500 could return to its historic level of 40%, up from the current level of 30% or 31%. "Over the long term, dividends have accounted for about 40% of total return," Alexander explains. "But over the last 20 years, it was between 10% and 15%."

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