I highlight some insightful points below:
- Outlook
- I do not believe recent credit-market turmoil will derail the economy - I view this market drop as a long overdue correction rather than the end of the bull market.
- I believe there's limited downside risk in the U.S. stock market from current levels, and returns over the coming year should be in the low double digits.
- Economic growth for 2007 : 2% to 3%
- Inflation for 2007 : 2%
- Fed policy : No change
- P/E ratio of the S&P 500 : 15
- Job growth : 145,000 a month
- The equity market is unlikely to fall sharply from current levels because :
- First, bull markets do not die of old age, they die of excesses such as accelerating and above-trend economic growth, rapidly rising inflation, and interest-rate hikes from a hostile Federal Reserve. Those excesses are simply not with us today, nor do I expect their arrival anytime soon.
- Second, the current bull market has experienced no price/earnings ratio expansion -- unlike every other bull market in the past five decades. In effect, this bull market is not characterized by speculation; rather, its expansion has been restrained compared with earnings growth and the trend of inflation and bond interest rates.
- His Picks
- Bank of America.
- Atlas America.
Disclosure : I don't have any of these equities listed above.
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