| BUSINESSWEEK ONLINE : DECEMBER 27, 1999 ISSUE | ||||||||
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| WHERE TO INVEST -- THE FRAMEWORK
Closely Watching the Wealth Effect In December, 1998, the financial chaos in Asia and Latin America was causing forecasters to mark down their outlooks for 1999. But Kathleen Camilli, director of economics at Tucker Anthony Inc., a subsidiary of Freedom Securities Corp., looked closer to home and based her optimistic forecast on a key support: the indomitable U.S. consumer. Her projection of 3% growth with little runup in inflation and some Federal Reserve tightening has made her BUSINESS WEEK's most accurate forecaster for 1999. Also correctly predicting solid growth with some tightening by the Fed was Daniel E. Laufenberg, chief economist at American Express Financial Advisors. Camilli credits her job at a retail brokerage firm as a primary reason for her upbeat view. ''Working at Tucker Anthony showed me how important the wealth effect is for households. And last year, our brokers were reporting no negative wealth effect among their customers,'' despite the financial turmoil caused by 1998's Russian default, the Long-Term Capital Management bailout, and a shift in Fed policy. For 2000, Camilli again expects a solid consumer sector thanks to another good year for the stock market and a strong labor market. She also expects one more hike in interest rates by the Fed and a drop in the jobless rate to 3.6%, the lowest rate projected in BUSINESS WEEK's survey. She is worried about profits: ''With the labor pool shrinking, wage growth will accelerate. But pricing power is almost nonexistent. Somewhere along the line, someone's profits will get squeezed.'' Camilli hangs her yearly forecasts on a long-term vision of the economy. ''I believe we are in a disinflationary secular trend,'' she says. It began with the fall of the Berlin Wall, which unleashed capitalism and competition around the world at the same time that new technology touched off strong productivity gains in the U.S. Looking ahead, Camilli thinks the Internet will continue to hold down inflation, even in services. FATHERLY ADVICE. The 40-year-old New Jersey native began college as a French major at Rutgers University. ''But my Dad said, 'Kath, study economics. You have to eat,''' jokes Camilli. His advice opened her up to a field of study she fell in love with. ''Economics explains life,'' she says. ''It is about human interactions.'' After graduation, Camilli began her economics career at the New York Fed. She joined Tucker Anthony in 1996 and lives in New York with her husband, Peter Nowicki, and two sons. Will her sons become economists? Not likely, Camilli says: ''They see how much traveling and time I put in for work, so I think they find economics a drag.'' Still, she may be tempted to give some parental advice about what to study when they enter college. After all, they will have to eat, too. By Kathleen Madigan _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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