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To: d:oug who wrote (38230)	8/3/1999 5:04:00 AM
From: d:oug	Read Replies (1) \| Respond to of 116759

anyone know who is - HUGH JOHNSON, CIO, FIRST ALBANY Keep up with the latest market trends with one of the nation's most quoted economic analysts--Hugh Johnson, Senior Vice President and Chief Investment Officer of First Albany Corp. and Chairman and President of First Albany's Asset Management Corp. ------------------------------------------------------------------------ Synchronized Global Expansion Update 7/26/99 It is easy to become hysterical when one becomes caught up in the daily or even weekly changes in the markets. Take for example what happened last week in Asia. Interest rates rose…in some cases sharply…and stock prices declined…in some cases sharply. Interest rates rose quite sharply in Singapore, Thailand, and the Philippines; stock prices declined sharply in South Korea. These moves appear to be sharp changes in the financial markets. And, for one week, they were. It is, however, important to place these changes in a more general context—to review the changes in the context of what has been generally occurring in these markets. Generally, stock prices have been rising in 1999. The same has been true for Europe. Stock prices are higher in 1999 in Germany, France, and the United Kingdom and, with the possible exception of the United Kingdom, the trend seems to be positive even though prices have declined somewhat recently. There is also a pattern…generally…for long-term (10-year) interest rates. Generally, although interest rates are lower in 1999 than they were in 1998, they have begun to rise. Although interest rates are generally lower in 1999, they have generally begun to move up from their April lows. The same has been generally true for Europe, as well, where interest rates have been generally rising all year. Stock prices and interest rates are rising in both Asia and Europe even though there are some teeth-rattling reversals for days or weeks. In our judgment, stock prices and interest rates are rising because early warning signs for the Asian and now European economies are pointing up. The Foundation for International Business and Economic Research publishes indices of leading economic indicators for various regions of the world to include North America, Europe, and Asia. The six-month rate of change for each is shown in the following three charts. Stock prices, interest rates, and leading economic indicators dictate a more normal stock market-economic-interest rate cycle is unfolding. In response, forecasts for other countries for 1999 are for stronger growth and, moreover, those forecasts are being revised higher…generally. The case is reasonably sound that the Asian, North American, and European economies will continue to expand. Under these conditions, the U.S. is unlikely to benefit to the same extent as from ample global capacity conditions and declining import prices. After 27 consecutive year-to-year declines, import prices have begun to post increases. This is somewhat a useful leading indicator of inflation. As such, it is no longer suggesting that U.S. inflation rates will decline. Strategy As warned last week, we are recommending investors reduce the percent of equity assets invested in industrial issues. As mentioned last week, the trend in seven of the nine sectors that we track is lower, and the trend in two sectors (technology and conglomerates) is higher. We would add that the relative performance of smaller issues continues to deteriorate and the relative performance of large-capitalization issues continues to strengthen. We would postpone adding to small stock positions until we see a change in these trends. ------------------------------------------------------------------------ First Albany Corporation is a member of the NYSE and other principal exchanges as well as a member of SIPC and NASD. Important Information. © First Albany Corporation, 1999. All rights reserved.