Word: slowdowns
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With tech stocks limping, the dow underwater for the year and most everyone's tea leaves pointing to a slower economy, you may find yourself thinking the unthinkable: Time to buy bonds. Ugh. You wouldn't be nuts. Fixed income is a great place to hide in a slowdown, especially one that spills into recession. The last time that happened was 1990, which is also the last time that both bonds and cash outperformed stocks for a calendar year...
...taking their most defensive posture in years. It all seems a little overdone. Few economists forecast a recession anytime soon. Yet with the often unsettling month of October looming and growth clearly slowing, being defensive makes some sense. As the economy slows, assuming interest rates decline with the slowdown, long-term bond yields will decline. That makes existing bonds more valuable because of the higher interest rate they pay. Michael O'Higgins, manager of the O'Higgins Fund, believes T-bond yields can drop to about 4.6% in 12 months, from about 5.8% now. That would translate into...
...Slowdown? Did anyone say slowdown? There have been plenty of worries about the effects of interest-rate hikes on the U.S. economy in the past few months, but when he takes the oath of office next Jan. 20, the next President, whether it's Al Gore or George W. Bush, will inherit the sunniest economic prospects to greet any new Chief Executive since Lyndon Johnson in 1963. Yes, it looks like the output of goods and services will be increasing more slowly. But the growth rate will slip only from one that clearly was too fast to last...
...colleagues on TIME's board were sounding full of "Panglossian optimism." No, the economists did not contend that this is the best of all possible worlds. But like Voltaire's Dr. Pangloss, they did insist that developments that at first glance might seem bad are actually good. Specifically, the slowdown in growth from manic annual rates of 6% for the most recent 12 months--the last half of 1999 and the first half of this year--and an unbelievable 8.3% in last year's final quarter...
...long-awaited slowdown is "absolutely" under way, said Abby Joseph Cohen, who heads the investment-policy committee of Goldman Sachs, the giant investment firm. The series of six interest-rate increases forced by the Federal Reserve between June 1999 and last May are not the only reason, she said. Consumers are also showing some signs of having temporarily satisfied pent-up demands. "If you bought a new car in 1999 or early 2000, you're not buying another new car; and if you upgraded your home by moving into another one over the past year or so, you aren...