April 01, 2002

Much of what we expected has come to pass. The economic recovery arrived earlier and appears to be stronger than most people anticipated. Looking forward, our forecast paints a very rosy scenario for the economy in the coming months: A real GDP growth rate in the neighborhood of 3.5% for 2002 accompanied by a 2.5% inflation rate and, although temporary, a surge in real corporate earnings. The forecast is as good as it gets. How and why did our model produce such an optimistic forecast? The key ingredient behind the forecast is the market,s expected increase in short-term interest rates during the next 24 months. (full article attached)

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