* Abby Cohen Watch * - sees slight Fed hike, no inflation
biz.yahoo.com
DETROIT, Oct 27 (Reuters) - Goldman Sachs & Co. chief U.S. equity strategist Abby Cohen said Wednesday the Federal Reserve may raise interest rates slightly in November, but after that rates should stay relatively steady for several months.
And despite recent stock market tumult, Cohen said she believes U.S. equity markets remain about 5 percent undervalued relative to bonds.
Cohen, a widely respected market analyst and one of the most consistently bullish on Wall Street, also said she expects U.S. inflation to stay in check because the global economy has not fully recovered its economic momentum.
''It would take several quarters of very strong economic growth worldwide before we would see an inflation problem develop,'' Cohen said following remarks to the Economic Club of Detroit.
Fed policy makers on the Federal Open Market Committee (FOMC) ''very may well'' decide to hike rates a quarter percentage point when they meet next month, Cohen said. But that would merely take back the rest of the three rate cuts enacted last fall amid a global financial crisis, she said. It would not represent a fundamental change toward tighter monetary policy.
''Even if they decide to do that, they haven't made this huge tightening move,'' she said.
Cohen predicted the next year or two will remain positive for U.S. corporate profits with continued growth in technology and financial service sectors. Other industries that have struggled, such as energy and basic materials, should continue to improve.
Goldman forecasts the S&P 500 Index will hit 1385 in 1999 and rise to 1450 a year from now. It was about 1282 Wednesday.
Cohen said the Internet will help the economy by bringing customers and suppliers closer together, leading to lower prices. Companies must also seize the opportunities that electronic commerce offers to communicate with customers, she said.
U.S. companies are well prepared for the Year 2000 computer transition, although some developing countries may have more problems, Cohen said.
''All of the major computer systems will work,'' she said. ''I cannot guarantee my microwave oven.'' |
