Significant Slowing for Economy in 2007

With inflation fears receding, S&P believes housing is now at the heart of gauging the magnitude of the economic slowdown

From Standard & Poor's Equity Research

Here are the notes from Standard & Poor's Investment Policy Committee meeting, held on Wednesdays.

Fundamental Outlook

Equities have performed well recently, as declining oil prices and a more benign inflation outlook are increasing investor conviction that an end to Fed tightening is emerging, in our opinion. However, with the economy slowing amidst a significant weakening in the housing market, we believe upside through yearend will be limited, as 2007 EPS visibility remains murky.

Since the market bottomed on June 13, large-cap stocks have outperformed, with the S&P 500 index up 6.1%, vs. only 4.3% and 2.9% advances for the S&P Small Cap 600 index and the S&P Mid Cap 400 index, respectively. We believe this quality rotation will continue.

  S&P's Asset Allocation
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