Stocks, Dollar, Interest Rate Mid-Year Prediction Update
Friday, June 1st, 2007
By Michael Lombardi, MBA for Profit Confidential
With the mid-year fast approaching, it’s time to update my economic predicts for 2007:
Interest Rates — As I’ve been writing, I don’t expect U.S. interest rates to fall much this year because higher domestic rates are needed to support our fragile dollar. Yes, a lower priced currency is what America needs, but our greenback cannot fall too quickly on the world market because we still need foreign money coming into the U.S. to finance our debt.
There is a camp of economic thought developing that believes U.S. interest rates might need to rise to deal with our inflation and dollar problems. Are they right? Let’s just say that camp’s theory is gaining more credence as time passes.
U.S. Dollar — One of the biggest gainers this year against the greenback has been the Canadian dollar. Only a few short years ago, it would take CDN$1.54 to buy one U.S. dollar. Today, it only takes $1.07. I made a prediction of few years ago that the Canadian dollar would eventually be on par with the U.S. dollar — a prediction I’m sticking with.
Yes, the strength of the Canadian economy is playing a role in the rise of the value of the Canadian dollar. But it is my belief that the U.S. dollar weakness is more to blame. Too much debt and an increasing trade imbalance will continue to place pressure on the U.S. dollar throughout 2007.
Stocks — You can’t argue or fight an investment trend, and the trend for stock prices continues to be upward. In absolute terms, the Dow Jones Industrial is at a new record high. If we value the Dow in euros, pounds, or gold, the Dow is still below the level it traded for in early 2000. It’s no secret I’m not a big fan of big-cap stocks. But the trend is your friend. For now, I continue to see equities with an upward momentum trend… but only in straight numbers. When measured in euros, pounds, or gold, it would take a huge rally for the Dow to break to real new highs and that’s something I simply cannot see happening with a weakening U.S. housing market and a cash strapped American consumer.
Next Post: Taking a Look at Market Volatility
Previous Post: Homeland Security Spending Could Drive This Canadian Stock
Tags: big-cap stocks, Dow Jone, gold, interest rates, U.S. economy, U.S. housing market
Tweet
Sign Up for PROFIT CONFIDENTIAL and
receive a FREE copy of our exclusive report:
"A GOLDEN OPPORTUNITY FOR STOCK MARKET INVESTORS"
We respect your privacy and
will never share your e-mail address.
Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
