Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:
Summary: There is a surprisingly large gap in the economic outlooks of two of Wall Street's biggest investment firms. Goldman Sachs Group (NYSE:GS) believes the Federal Reserve's benchmark rate will fall from its present 5.25% to as low as 4% by the end of 2007; JPMorgan Chase & Co. (NYSE:JPM) sees it rising to 6 percent. Accordingly, Goldman recommends equities, while JPMorgan prefers an overweight cash position as a defensive strategy. Nicholas Sargen, chief investment officer at Fort Washington Investment Advisers in Cincinnati: "It's not unusual for firms to have different views, but the difference in magnitude and direction between Goldman and JPMorgan is unusually large." Goldman believes the worst U.S. housing slump in a generation will force the Fed to cut rates sending stocks upwards; JPMorgan remains bullish on the economy due to cheap credit and falling oil prices, and sees the Fed raising rates to battle inflation.
Related links: • Revenge of the Bonds Bulls: Wall Street Now Views the Fed as Unlikely to Cut Rates • Remaining Bullish, Despite the Storm Clouds • Fed Officials Disagree, But Number of Hawks Growing • When Does the Fed Cut Rates, With the Dow This High?
Potentially impacted stocks and ETFs: iShares Lehman 1-3 YR Treasury Bond (NYSEARCA:SHY), S&P 500 Index - "Spiders" (NYSEARCA:SPY), iShares Dow Jones U.S. Total Market (NYSEARCA:IYY), Vanguard Total Stock Market ETF (NYSEARCA:VTI), streetTRACKS Total Market (TMW)
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