June 24, 2002

Looking forward, our forecast paints a rosy scenario: A positive real GDP growth rate accompanied by little or no inflation and, although temporary, a surge in real corporate earnings. Even though much of what we expected for the real economy during the first half of the year has come to pass, we have been very disappointed by the equity markets. The disconnect between the two is a source of concern. Ultimately the economy and the markets will reconnect and the real economy will drive valuation. At that point we expect the market to continue its upward secular trend, albeit at a slower rate of increase. The reconnection between the market and the economy remains an illusive issue. (full article attached)

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