11
that the stock market will begin to recover early on in the year and will end about 11,250. The
NASDAQ will finish the year at 3,200.
.
BOND MARKET Updated 12/24/2000
It was the worst year ever for bonds according to most analysts. Having said that, declining
interest rates will make for a good year for bonds.
INFLATION - CPI
In our 1998 and 1999 forecast it was mentioned that inflation was a low levels but there was
the haunting specter that is was just around the corner. One of the biggest worries has been
and is oil.
On November 22
nd
, 1999 Iraq, in order to put pressure on the security council, continued to
cut production. This means that their (people) economy is continuing to suffer. Their goal is
to get the security council to adopt the Russian not the Dutch proposal. The Russian one,
concerning the inspectors, is more lenient. This is coincidental with OPEC which has been
cutting production. The result of this is that early in 1999 the price of oil was $11-$12 Per
barrel. As of late November 1999 it was $27 per barrel which was the highest level in 9 years.
This roughly translates to about $.35 per gallon at the pump.
Currently it is over $35 per barrel.
During the course of the year, the CPI began to surge and the Fed continued to raise rates.
For example in March the CPI rose +.07%. For the region in October is was 3.2% annualized.
The biggest factor was energy. With the economy slowing, it is estimated that the CPI will be
in the 1.25% to 2.1% for the year 2001.
Y2K
In the prior forecast it was reported that many of the lending institutions interviewed ( in late
1999) as well as Wall Street lending programs are backing away or have withdrawn from the
mortgage market until after the first of the year. Much money has been spend to correct this
problem. Since the United States is in a very powerful position economically, by January 15
th
, 2000 this should be a non-issue even though there will be temporary sporadic problems
globally. As it turned out, a great deal of money was spent and there were no significant
problems.
RETAIL
Retail had a good three quarters but the Fed tightening has show sign of effect. As of
12/13/2000 U.S. retail sales fell triggered the biggest decline in auto sales in two years.
Major company after company reporting falling sales and earnings. According to the Wall
