When Robert Goodman looks at the slowing economy and the struggling stock market, he doesn't see the sky falling.
He sees a buying opportunity for investors. And a big one.
"Investors are being offered an investment opportunity unlike anything we have seen in our lifetimes," said Goodman, the managing director and senior economic adviser for mutual fund company Putnam Investments.
Goodman said Monday during a forum in Cheektowaga sponsored by McDonald Investments that the slowing economy and the drop in stock prices over the last year has uncovered values that investors haven't seen in two to four years.
But Goodman doesn't think the economic downturn will last too long and a recovery could begin as early as this summer, despite the steady stream of gloomy news over the last few months.
"The economic fundamentals are sound, but the perceptions are terrible," Goodman said. "I don't know what the trigger will be, but when the perception changes, we are going to see an explosion in the markets the likes of which we have not seen since 1982," when the Dow Jones Industrial Average surged by 30 percent in two months.
That's why Goodman recommended that investors who have cash that they ultimately want to use to buy stocks put half of it in the market right away and invest the other half in small increments on a weekly basis over the next six months.
"If you try to time this market, it will blow right past you," said Goodman, who suggested a investment mix that is balanced between growth and value. "This isn't a bear market. This is a correction within a bull market."
What makes Goodman so confident about the stock market is the combination of a fiscal policy from the Federal Reserve that now is geared toward stimulating growth, along with federal budget surpluses that are likely to lead to some sort of tax cut as well as a shrinking federal debt burden.
With inflation still in check, Goodman said he thinks corporate profits will start showing signs of improvement during the second half of this year. And he thinks interest rates will continue to decline, helping to set the stage for a rebound by the economy later this year.
"This economic slowdown is going to persist until at least the second half of this year," he said.
On the political front, with President Bush pushing for a $1.6 trillion tax cut and Congressional Democrats favoring debt reduction and a smaller tax cut, Goodman said the ultimate result will be somewhere in between.
He predicted that Congress and the president will settle on a compromise that reduces the top tax bracket to 36 percent from the current 39.5 percent and changes the system so more lower income taxpayers pay no taxes. Goodman also said he expects an increase in the threshold for the estate tax to kick in, as well as the elimination of the marriage penalty.
"When this whole process is over, the surpluses will disappear," Goodman said. "That's exactly what they have to do. One of the reasons the economy is slowing down so much is that surpluses are a drag on the economy."