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Strategies & Market Trends : Paint The Table
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To: Jorj X Mckie who wrote (19224)3/12/2002 9:51:47 PM
From: Augustus Gloop  Read Replies (2) of 23786
 
Analyst: recovery's not wishful thinking
By Julie Rannazzisi
03/12/2002 15:46
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Bob Gay, global head of fixed-income research at Commerzbank Securities, said the U.S. economic recovery no longer appears to be the "wishful thinking" of security analysts and economists. "Fed chief Alan Greenspan inadvertently set the stage for the sweet spot in financial markets [by] making it clear that the FOMC is not likely to raise rates until there are convincing signs of a broad-based recovery. Thus, even if the economy gains momentum, as now is the case in the manufacturing sector, the Fed will not be inclined to pour cold water on the market's enthusiasm. Both credit spreads and equities are benefiting," he said in a research note. Gay said markets quickly priced in the prospect of better growth and believes the backup in interest rates has largely run its course. "Credit spreads are still wide by historical standards and may tighten further. This seemingly swift end to a remarkably shallow recession does not necessarily signal a sudden improvement in credit quality. Instead, businesses are focused on reducing leverage and raising profit margins. Profits should fare much better in 2002 even if the overall recovery is lackluster," Gay concluded.
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