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OUR VIEW IN 1998
Prepared by Westfalia Investments, Inc.
We look for less economic activity in 1998. We see growth moving lower in the second and third quarters, as the full impact of the Asian crisis is realized.
GROSS DOMESTIC PRODUCTS: First quarter 3.2%, second quarter 2%, third quarter 2.4%, and fourth quarter 3.6%. Total GDP to average 2.7%.
INFLATION: We look for inflation to move lower as disinflation set in due to deflationary pressures from Asia. We see inflation moving below 2% in the first half of the year, averaging 2.3% in 1998.
INTEREST RATES: Long-term rates to move down to 5½% in the first six months of the new year, with long-term rate backing up to 6¼% in the second half of 1998.
U.S. EMPLOYMENT: We expect a less tight job market as economic activity slows in the first six months of 1998. We see unemployment moving towards 5.3 in the second half of the year!
COMMODITIES: CRB index to move lower towards the 220 level in the first half of the new year, with little chances of the index moving much above the 260 range for the balance of 1998.
CRUDE OIL PRICES: To hold steady with a bias toward the low $18 level. We look for crude to average $19 for all of 1998.
GOLD: Continued low inflation, increasing central bank selling should continue to depress the gold market. We see gold moving towards $275 before stabilizing above $300.
U.S. EQUITIES: The outlook for the U.S. stock market remains favorable. We look for corporate earnings to hold at the double-digit levels for all of 1998. We believe U.S. productivity will continue to improve as low inflation lessens the chances of increasing labor cost. We see a less aggressive stock market in 1998 with the Dow moving into new high territory with little chances of exceeding gains made in 1997. We see the Dow reaching 8700 in the first half of the year.
December 2, 1997 Peter Cardillo, Director of Research
Westfalia Investments, Inc.
90 West Street, New York, New York
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