Difficult to disagree with Roach, except that he does not take enough into account the positive impact on consumer ability to spend of the vigorous growth in labor since the beginning of this year. If labor continue expand at a clip of 300,000 new jobs every month for another quarter, we add at least 1% to consumer "capacity to spend", and that from less than satiated consumer, sufficient to compensate for the respite the rest of the consumer will start and engage in soon. Thus from an econometric point of view, as long as we do not get a string of three months when job growth drops under the 200,000/250,000 new jobs per month, the expansion is still alive and probably more than two quarters away from peaking, and thus market should follow earnings. If interest rates were to rise rapidly (more than what is currently already anticipated by the 10 years bond), then valuation consideration will come into the equation balancing and maybe overcoming the expected earnings growth. Longer term (2005) is still a strong possibility that Roach will , finally, prove to be right.
