Les has a great story over on his thread.
Message 19213216
bcaresearch.com
Here are some "snips"
<In terms of strategy, we are looking to buy stocks on
weakness and sell bonds on strength.>
<The FOMC left interest rates unchanged this week
and maintained an easing bias, even though it acknowledged
that the economy was improving. The Fed wants a wide
firebreak from deflation and views inflation as “undesirably
low”. The implication is that the Fed is a long way from
moving to a tightening bias, never mind raising rates (“policy
accommodation can be maintained for a considerable period”).>
<Job
growth has to accelerate markedly before the Fed will be
convinced that the economic recovery has become selfreinforcing.
The bottom line is that the short end of the yield
curve will remain depressed until 2004, and even then any rate
upcycle will be very gradual.>
<The acceleration in economic activity has caught bond bulls
off-guard. Importantly, consumers are in much better shape
than the consensus believes and even better than consumers
tell pollsters, as confirmed by the jump in consumption since
the Iraq war. Retail sales were strong again in July, continuing
the recent pattern whereby sales outperform expectations (and
sales reported in recent months were revised higher, which is
another telltale sign of an accelerating economy,>
<Tax cuts and this summer’s rebate cheques are boosting
already decent income growth. A better job picture would
propel even stronger consumption growth, and such an
outcome should gradually unfold in the months ahead.>
And finally,
<Technically,
markets are thin during August and there is an old saying:
“never short a quiet market”. In other words, we expect key
resistance levels to soon give way to new highs: the 4200 area
for the U.K. FTSE 100 (which the market has modestly
breached late this week), 3500 for the German DAX, 10,000
for the Japanese Nikkei and 1000 for the S&P 500. The main
propellant should be rising earnings expectations, perhaps with
a spark from a better job report in the U.S. this autumn. Stocks
need a “goldilocks” employment picture, not too hot or too cold.
Fortunately, only a gradual turnaround in the labor market
seems probable, as the corporate sector is keen to maintain
gains in productivity and profit margins.>
BCA is obviously a believer that not only are we doing much better now than the pessimists think, the future is full of promise.
Don |
