John Shaughnessy Market Quotations

I think frankly the Fed might even raise rates maybe 25 basis points, but that should be it, I think, for the rest of the year. And the market should breathe a huge sigh of relief that, plus the strong earnings reports for the second quarter. For example, operating earnings are supposed to be up 18-to-20 percent. So certainly the ingredients for a good strong summer and early fall rally are in place.

Look back in the last 30 years, the Federal Reserve has caused every major market pullback because of tightening the monetary policy, ... I believe the odds are that they will be raising rates by 25 basis points on Nov. 16. But beyond that, that will be it, well into the year 2000 before any further rate increases take place.

Right now, as I see it, the market probably will stabilize through mid-May. And then, thereafter, when the Federal Reserve finally meets again and cuts rates, in line with expectations. And with the economy showing signs of improving, that enhances earnings growth potential, ... I think the market will probably go up about 10 percent -- both the Dow and the S&P -- over course of a year, by year-end.

I think what the market is saying is, 'The heck with interest rates, let's focus on the fact that the economy is in good shape, the fact that earnings are probably going to continue to be very strong,' ... In the Game.

Bank One is selling at a discount to the market and provides a modest current yield. And frankly, it's got the capacity to grow, with earnings growth of 13 percent a year over the next number of years. So it's one that we think, certainly for value-conscious investors, makes a lot of sense.

What we're seeing happening is the best of all worlds. The economy is strong yet inflation remains quiescent. The earnings outlook remains reasonably good. Given those things, the money continues to flow into the market from both domestic and foreign sources.