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WESTFALIA INVESTMENTS
TECHNICAL COMMENTS
The U.S. trade deficit for June narrowed to $8.6 billion dollars. Indeed, the trade numbers were a pleasant surprise indicating added growth. The decision to keep interest rates unchanged at the August FOMC meeting was no surprise. Remember, the Fed chief conceded at his last testimony on Capital Hill, that inflation is presently not a problem. UPS and the teamsters came to an agreement settling their differences and ending the strike. What does the agreement mean for the financial markets? As we see it, the agreement will not lead to wage pressures in the short term; but, the question of further workers' gains will cloud the bond market. We look for the Federal Reserve to hold off from raising short-term rates until the end of the year!
EQUITIES: A 7% pullback from the record high close of 8259.31, registered on August 8, is now a memory. The market needed to correct, and, as we had suspected, the pullback was short-lived. We have been saying that the fundamentals of the U.S. economy remain very positive, and we expect this trend to continue for some time. On the horizon, we see a small pick up in inflation. However, we do not expect this increase to derail the bull. We continue to look for the market to trade in a range of 7900 to 8200 for the balance of the summer!
GOLD: A bit higher inflation could boast prices above the $340 level!
BONDS: No change!
DOLLAR: No change, we continue to believe the U.S. Dollar has peaked against the D.M.
August 21, 1997Peter Cardillo, Director of Research
Westfalia Investments, Inc.
90 West Street, New York, New York
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