What the Economists Are Saying

Thomas Higgins, Payden & Rygel Investment Council:

"The biggest downside surprise may be inflation. The risk of the current disinflation turning into a broad based deflation will weigh on the markets in 2009."

Joshua Shapiro, MFR:

"Potential downside surprises are much more numerous. The most severe would be the start of a deflationary spiral that proves impossible to stop given the massive deleveraging taking place in the economy."

Robert Shrouds, DuPont:

"Lower interest rates along with sharply lower energy and commodity prices are providing significant support to real incomes."

Lynn Michaelis, Weyerhaeuser:

"I don't think the dollar turnaround is lasting. It reflects the financial crisis and need for U.S. companies to rebuild balance sheets and get cash. The fundamentals still point to a weaker dollar and that should be a good thing. It will help reduce our external imbalance and reduce the risk of deflation in the U.S. economy."

Maury Harris, UBS:

"A lasting dollar turnaround through the fourth quarter of 2009 and global weakness is a good thing for U.S. consumers wanting cheaper imports. That raises their real incomes."