Friday, February 1, 2008

Wait ‘til Next Year

Dispatch from Denver:

Last night’s Market Forecast event here at the very scenic Pinnacle Club produced, as usual, many valuable insights from my panelists Mary Ann Bartels, Don Rissmiller, Chris Taggert, and Vitaliy Katsenelson, which I will elaborate on in future blog postings and reports. There is one item, however, that I wanted to pass along today that I think would be of immediate use – the increasing odds that the whatever re a recession in the US now looks like a whenever, as in next year.

This thought comes from Don Rissmiller of Strategas. Don believes that the odds of a recession occurring in the US is now greater next year (60%) as opposed to this year (40%). The basis for this view rests with the large amount of stimuli from the Fed and the US government in a major election year (and all that brings with it. Think pork barrel earmarks.).

Investment Strategy Implications

Pushing the US recession into next year has certain elegant qualities to it in as such an occurrence has many ties to a technical picture of the equity markets that still has rally written all over it. Investor sentiment so rabidly bearish along with the much too nice and tidy consensus thinking of the majority of investment strategists (down 1H08, up 2H08) provides fuel to the contrarian fire. Moreover, the justifiable concerns re huge losses emanating from the credit crisis is likely to take more time than many (including me) think it should (a point noted by two of my panelists last evening, Rissmiller and credit expert Chris Taggert.)

Wait ‘til next year is a phrase that is often applied to sporting events (such as the feeling Patriots' fans will experience this Sunday when their team loses to the Giants!). It now appears that when it comes to the recession the phrase will likely apply to US economy as well.

Have a good weekend.

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