|
Cohen still bullish
|
 |
November 4, 1999: 5:03 p.m. ET
Goldman Sach's' Abby Joseph Cohen says rate hike already discounted
|
NEW YORK (CNNfn) - Abby Joseph Cohen, Goldman Sachs' top stock picker, said Thursday the Fed may raise interest rates again before the end of the year, but the move is not expected to upset the bond market because fixed income investors have already factored a rate hike into their models.
Appearing on CNNfn's In the Money, Cohen also pointed to the financial sector as an attractive investing opportunity.
The following is a transcript of her interview.
BILL TUCKER, CNNfn Anchor: Abby Joseph Cohen of Goldman Sachs. She turned bullish in 1991 and hasn`t looked back.
TERRY KEENAN, CNNfn Anchor: And she joins us now from Boca Raton, where she is attending Securities Industry Association.
And welcome, Abby, nice to have you with us again.
ABBY JOSEPH COHEN, GOLDMAN SACHS: Thank you.
KEENAN: The market has been behaving very nicely since about this time last week. Has your forecast changed at all?
COHEN: Our forecast has not. We had thought that the skittishness in the preceding weeks was really unwarranted. Investors, in our view, were unduly concerned about significant rises in inflation.
We think inflation in the United States will stay under pretty good control. We think there is only a modest updrift coming and intermediate long bond yields. We are discounting a far less pleasant inflation picture than one that was likely to occur.
TUCKER: Well, Abby, you are discounting any dramatic action by the Fed.
There are others on the Street that would argue that the Fed is not going to be done raising interest rates, either in November or perhaps in December or January. Does your scenario account for continued moves up by the Fed or would you be concerned if that were to happen?
COHEN: We think that the Fed may, indeed, decide to raise interest rates. But if they do, we think that is still well discounted into the bond market. Fixed income investors and equity investors alike have been talking about a tightening move by the Fed and, indeed, by the European Central Bank and the Bank of England. And now that these other changes have occur and the Fed mace raise interest rates, it is something that I think is already reflected in bond prices.
KEENAN: Investors have been taught over the years, don't fight the Fed, and in fact we've seen the Fed raise rates twice this year. We've seen the bond market, as you mention, more than reflect that with a huge run up in long-term rates. Why do you think that this time around, it hasn't affected stock prices the way it does historically?
COHEN: Because the starting point of interest rates has been so different. Keep in mind that this time last year, when there were concerns about an economic black hole or global economic Armageddon, the Federal Reserve lowered U.S. short-term interest rates by 75 basis points. Thus far, they have reversed only 50 basis points of that. If they were to raise interest rates another 25 basis points, it would just represent a reversal of what they did a year ago. And clearly the global economy is not in the danger it was in 1998.
So we don't think this is a Fed that is anxious to raise interest rates dramatically because there's an inflation problem, but rather they are removing that extra stimulus they provided when the global economy was in more dire circumstances.
TUCKER: Last question for you, Abby, has to do with your company. Yesterday, Goldman Sachs got downgraded by Merrill Lynch. It seems everybody is moving up in this market but you. You got any comments on Goldman's stock?
COHEN: No, I have no comment, thank you.
KEENAN: Well, then let me throw a quick question to you because when we talked this summer you were right on the money as usual recommending investors move into the energy sector. Where would you be positioning yourself now in terms of sectors?
COHEN: We had thought the energy sector looked fabulous this time last year when energy was at $10 a barrel for crude oil. Right now, we think the best value opportunities are in financial services, including banks, and we also believe there are good value opportunities in small-and mid-sized stocks.
TUCKER: Terrific. Abby Joseph Cohen, of Goldman Sachs, thank you very much for joining us.
KEENAN: Thanks, Abby.
COHEN: Thank you.
|
|
|
|
|
 |
|
