Capital questions for Wall Street

Article Abstract:

US stocks are perceived as riskier and this has affected their prices. The risk does not appear to be derived from interest rates and inflation, but is linked to the impact of industrial restructuring. Profits have been boosted by better usage of capital rather than by employees working harder. This may not continue, partly because capacity usage is rising, and because measures such as closing les-productive plants cannot be continued indefinitely. Stock prices are likely to be hit when the ratio of output to capital ceases to rise.

Economic aspects, Production management

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Blow-off

Article Abstract:

Salomon Brothers forecasts a possible drop in US stock prices which could be precipitated by a rise in interest rates. Stock prices may be pushed up further, possibly due to purchases by foreign investors, only to drop sharply. Changes to capital gains tax due in Aug 1997 could lead to selling as investors seek to benefit from a tax cut by realizing profits. Stock prices are unlikely to drop by as much as 40% but they could fall by 20%.

United States economic conditions, Stock price forecasting

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