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It's financial, not economic
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October 27, 1997: 10:33 p.m. ET
U.S. economy strong enough to withstand volatility of Asia markets
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NEW YORK (CNNfn) - The record-setting plunge in the U.S. stock market on Monday represented more of a dramatic shift in financial sentiment than a fundamental change in economic perspective, three of the nation's top Wall Street pundits told CNNfn.
"This is a financial panic, not an economic panic. History gives you the blueprint as to what to do with this," Harvey Eisen, portfolio manager at Travelers Group, told "Moneyline with Lou Dobbs."
The recent volatility in the Asian Pacific equity and currency markets has fueled speculation that the profitability of multinational corporations will be adversely affected.
Yet, the U.S. economy is diverse enough that the effects of one global region isn't likely to have a long-term fundamental impact, said Abby Joseph Cohen, co-chair of Goldman Sachs' Investment Policy committee.
"I think it was more of an excuse," Cohen said. "Weakness in Asia just hurts a strong economy a little bit around the edges."
"You have this every couple years," Travelers' Eisen agreed. "You have a 10 or 11 percent decline. We've had it. It will probably go a little bit lower but this is not the beginning of the end."
The two market observers as well as Edward Yardeni, chief economist at Deutsche Morgan Grenfell, agreed that stable U.S. inflation will help to allay fears that interest rates are likely to rise.
"I think what we had today was a disconnect between the stock market and the economy. The U.S. economy looks great...corporate profits [are] good...inflation and interest rates will be friendly for longer," Cohen said.
However, investors should stay away from multinationals with larger exposures to Asia, advised Yardeni.
"I think it's actually good to stay with small-cap and mid-cap names that aren't exposed to overseas risk," he said.
"I hope he's right cause that's what I own," Eisen said jokingly.
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