Slider, Joe Battapaglia is betting (intermediate term at least) that both the Dow and the NASDAQ have some serious upside through the end of this year....My guess is max two 25 basis point increases left in the Fed and even that's doubtful after this last market pullback IMO.....The Battapaglia article just came to me via email from Prudential....
Gruntal & Co.'s Joe Battipaglia
Today's topic: Bullish Case Intact Despite Rate Increases
Joe Battipaglia
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Despite the recent half-point hike in short-term interest rates by the Federal Reserve Board, the fundamental case for U.S. equities remains solid. Strong operating performance here and abroad has resulted in a 24% increase in first-quarter profits and is setting the stage for what I believe will be the most profitable year ever for the S&P 500. This is even more impressive given the Federal Reserve?s attempts to restrain growth in the economy through a series of six tightenings. These rate increases are now beginning to take hold, with the economy, having slowed from the robust 7.3% pace in fourth-quarter 1999 to 5.4% in first-quarter 2000, now expected to achieve a 4% annualized rate of growth by year-end.
The real questions now are (1) will the Federal Reserve force a recession by excessively raising short-term interest rates? and (2) will inflation begin to accelerate meaningfully from here? I do not believe that, ahead of an election, the Federal Reserve would attempt to force the economy into a recession to control an inflation menace without considerable evidence of one existing. Against this backdrop, the consumer price index (CPI) and producer price index (PPI) data continue to show no troublesome signs of resurgent inflation. At present, the year-over-year core CPI and PPI have risen just 2.2% and 1.3%, respectively. Therefore, I remain optimistic that the bull market in U.S. equities will resume as the year progresses and achieve higher highs by year-end. My year-end targets remain 12,500 for the Dow Jones Industrial Average, 1,625 for the S&P 500, and 5,500 for the NASDAQ composite.
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