Legg Mason March commentary: "We continue to be optimistic about the outlook for the U.S. equity market for the balance of 2007. "
Despite all the hand wringing surrounding the sharp
late-February market sell-off and worries engendered by rising delinquencies
in subprime loans, the market was up in March and has gotten off to a
promising start in the first few days of the second quarter.
Our formula for potential double-digit total returns for the S&P 500 Index
this year continues to be the same as it has been: modest earnings growth
plus dividends plus some degree of P/E multiple expansion. We believe
that—at worst—the Fed will be on hold throughout 2007 and that they could
even cut rates a time or two depending on how the economic news breaks.
We continue to believe that the U.S. economy is in the midst of a housingled
mid-cycle slowdown that began in the second quarter of 2006. We think
the odds of this slowdown morphing into recession this year remain low.
This view was bolstered by the latest employment report (released Friday,
April 6), which showed non-farm payrolls climbing 180,000 in March and the
jobless rate dropping to a six-year low of 4.4%. Former Fed Chairman Alan
Greenspan recently put the odds of recession in 2007 at 1-in-3. We’d put
those odds at more like 1-in-4 or 1-in-5.
Read the complete commentary
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Despite all the hand wringing surrounding the sharp
late-February market sell-off and worries engendered by rising delinquencies
in subprime loans, the market was up in March and has gotten off to a
promising start in the first few days of the second quarter.
Our formula for potential double-digit total returns for the S&P 500 Index
this year continues to be the same as it has been: modest earnings growth
plus dividends plus some degree of P/E multiple expansion. We believe
that—at worst—the Fed will be on hold throughout 2007 and that they could
even cut rates a time or two depending on how the economic news breaks.
We continue to believe that the U.S. economy is in the midst of a housingled
mid-cycle slowdown that began in the second quarter of 2006. We think
the odds of this slowdown morphing into recession this year remain low.
This view was bolstered by the latest employment report (released Friday,
April 6), which showed non-farm payrolls climbing 180,000 in March and the
jobless rate dropping to a six-year low of 4.4%. Former Fed Chairman Alan
Greenspan recently put the odds of recession in 2007 at 1-in-3. We’d put
those odds at more like 1-in-4 or 1-in-5.
Read the complete commentary
Also check out:
