As paraphrased by my best contact at US Bank, Kit Ng, Client Manager of the Northern California Business Banking Group: Keith Hembre, Chief Economist for US Bank says:
First, he does not believe that inflation will become problematic enough for the Federal Reserve to reverse direction and begin to increase its fed funds rate this year. If he is correct, interest rates in general should be relatively stable in 2008. Second, he believes that the S&P 500 Index, valued at 15.8x our 2008 earnings forecast, is now fairly valued by historical P/E standards. How we arrived at a fair valuation is a painful story, with S&P 500 index down 4.5% since May 1st (the S&P financial index down 16.7% during that period).
If you want the full 17 page June outlook, please email me for a copy.
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