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CNN Live At Daybreak

America's New War: Valliere See Upturn in Economy

Aired September 18, 2001 - 09:36   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAUN, CNN ANCHOR: Right now I'm going to check in with Greg Valliere, who is a political economist and chief strategist for the Charles Schwab Washington Research Group.

Good to have you with us, sir. Thanks for joining us.

GREG VALLIERE, CHARLES SCHWAB WASHINGTON RESEARCH GROUP: Good morning, Paula. Hi.

ZAUN: I think a bunch of our guests have made it abundantly clear that the markets don't like uncertainty. What do you say to all those investors out there that watch the Dow hit a 2 1/2-year low yesterday? What should they do?

VALLIERE: Well, there is some hope, as Susan just said, that maybe we have hit bottom. However, I think it would be irresponsible to tell small investors that this market is about to have a major rebound. As you say, there's tremendous uncertainty, and until we get a clear read on the extent of the U.S. military campaign and the possible retaliation, this market is going to stay very, very choppy.

ZAUN: So what are the markets focusing in on now?

VALLIERE: I think the markets are in a sort of waiting period to see just what the U.S. does. The market has another domestic concern, and that's the likelihood that in this quarter, the third quarter, and the fourth quarter, probably, the U.S. economy will be in recession.

ZAUN: Are you convince of that?

VALLIERE: I think most economist would agree. The encouraging thing, Paula, is this: that there's so much stimulus getting into the pipeline, the Fed rate cuts, the tax stimulus that's coming over the next couple of weeks, the aide to New York, the aide to the airline industry. There's so much stimulus that a case could be made that by the end of the winter, early spring, the economy could be doing a lot better.

ZAUN: To what extent do you think it will make any difference that President Bush said for the first time that he encouraged government spending to stimulate the economy?

VALLIERE: I think it's important to see Washington is in basic agreement, we're not partisan right now, that Washington is in agreement that we need spending, whether it's for airlines or defense or intelligence, and that we probably need some more tax stimulus. I think most of the politicians are on the same page on this.

ZAUN: And when did you say it's realistic to expect that you could spend your way out of this recession that you predict will hit third quarter?

VALLIERE: Well, I think that as everyone looks at unemployment rate rising, as earnings staying weak, it's likely virtually every economist now feels that the economy will be soft. But, again, I think the economy could turn around by the end of the winter if there are no further terrorist interest in the U.S.

ZAUN: Are you going to buy any stocks today?

VALLIERE: I don't think this is a time to go plunging right in, but, again, my gut feeling is that we're pretty close to a bottom right now.

ZAUN: All right, Greg Valliere, thank you so much for your help this morning. Appreciate your dropping by CNN's studios in Washington.

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