By Evelina M. Tainer, Chief Economist, Econoday
December 20, 2002

Economic news was fairly decent this past week and should have been friendly for the equity market. Unfortunately, economic news took a back seat to war talk. Positive mornings for equity investors often turned into negative afternoons. Bad news for the equity market translated into good news for the Treasury market as the old safe-haven premium came back to the forefront. Gold has also made a rapid run-up lately as it normally does in times of uncertainty. Gold futures prices are up more than 6 percent in the past four weeks!

In a speech in New York, Fed Chairman Alan Greenspan touched on a number of topics he's addressed over the past year or so. He defended the Fed's inaction during the rise of the asset bubble; he noted that Japan's situation is dysfunctional and we are not likely to have similar deflationary trends develop in the United States. He suggested that the economy's soft patch has not quite ended, but factors such as cash-out mortgage refinancing will help boost consumer spending in 2003. He said it is too early to tell whether capital investment is beginning to come out of its shell.