-----Original Message-----
From: TD Waterhouse  [mailto:eServices@tdwaterhouse.com]
Sent: Monday, February 04, 2002  4:07 PM
To: sneal4@houston.rr.com
Subject: Market Insight:  Economic Recovery to the Rescue
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Market Insight for February 4, 2002	
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 [IMAGE] Economic Recovery to the  Rescue By Arnie Kaufman, Editor, The  Outlook 	


Stay  with a positive investment approach. 	
 Corporate  accounting and earnings quality issues, high P/Es and fear of additional  terrorism remain a drag on the market. Another restraint: Dynamic  leadership is absent and may not be seen until signs of improvement in  information technology spending breathe new life into that deeply  depressed sector.  But barring  dramatic new financial irregularity disclosures, the chances are good the  market will soon start moving forward again. The driving force, we  believe, will be an improving economy.  S&P  chief economist David Wyss feels that if inventory rebuilding accelerates  sharply in the period just ahead, it is possible the first quarter will  show strong GDP growth and the second quarter a relapse into negative  territory. He points out that the 1990-91 recession was the only one since  the 1950s that did not have a positive quarter sandwiched between down  quarters. Wyss thinks the more likely scenario, however, is a smoother  pace of inventory accumulation and rising quarter-to-quarter GDP growth  through 2002. This forecast implies upward-trending earnings this year and  next.  Investors,  burned badly by the 2000-2001 bear market, are in a show-me state of mind.  Short sellers and others who bet stocks will fall have become bolder  lately, and institutions have been moving cautiously. All of this suggests  that a good deal of fuel for an advance exists.   It wasn't a  good omen that the S&P 500 index slipped in January, losing 1.6%. As  mentioned a week ago, of the 19 times in the postwar period that the "500"  has fallen in January, the index then went on to score a gain for the full  year only seven times and suffered a loss for the year 12 times. That was  against a backdrop of 2.4 up years for each down year for the 56 years  from 1946 through 2001.   On the  other hand, a decline in the S&P 500 this year would be the third in a  row, and that hasn't happened since  1941.	


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