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Some experts say 2008 stock market may do better than expected

- Alan Lavine and Gail Liberman

At least one market strategist sees a positive note in the economy.

Milton Ezrati, Lord Abbett senior economist and market strategist, suggests stepping back from the daily rush of events.

He advises that you consider these points for 2008:

  • Housing remains a significant drag on the economy and a threat to financial markets.

  • Other aspects of the economy--such as exports and capital spending--should provide enough growth momentum to keep overall activity expanding, albeit at a moderate pace.

  • The rise in corporate profits that should accompany such growth should lift stocks.

  • Meanwhile, the Federal Reserve Board, once it's sure markets have recovered from the recent strains, should begin to raise interest rates again.

    "Housing, obviously, remains a critical point of concern," he says. "New housing starts have already dropped by more than 18 percent so far this year. And delinquency rates and defaults, already up, especially in the subprime area, are expected to continue at their relatively elevated levels."

    But businesses have the wherewithal to again finance an expansion in capital spending easily--given the huge amount of cash on corporate balance sheets--without borrowing.

    Similarly, the dollar's cumulative weakness on foreign exchange markets should benefit the economy by promoting at least a marginal pickup in exports. The effect is already becoming evident.

    "Against a background of continued economic growth, the Fed will begin to raise short-term interest rates again," he predicts. "But the absence of any significant inflationary pressure should contain any general rise in bond yields."


    Spouses Gail Liberman and Alan Lavine are syndicated columnists. You can purchase Alan Lavine & Gail Liberman's latest book Quick Steps to Financial Stability (QUE Publishing 2006) online at www.moneycouple.com or at your local bookstore. E-mail them at MWliblav@aol.com.

    To read more columns, please visit the column archive.

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