This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Daily Interview: OppenheimerFunds' Len Darling Sees a Recovery Next Year

The economy could return to positive growth by the second quarter of 2002 and reach 3% GDP growth by the fourth quarter, says Len Darling, the chief investment officer for OppenheimerFunds.

Len Darling
Chief Investment Officer,
Recent Daily Interviews
Montgomery Funds'
Bob Rezaee
Russ Kinnel
Simat Helliesen & Eichner's
Scott Gibson
Deutsche Bank's
Louise Purtle

Following a press conference on Tuesday, Darling told Daily Interview he expects a V-shaped recovery, with the economy on the ascent by the second half of next year. He also said economic conditions at a conflict's outset and how inflation develops are the main factors that determine how the market will react.

[The fund executive also noted that OppenheimerFunds, whose <hlink href="XTSC:10001030"> headquarters were destroyed </hlink> in the World Trade Center attack, was &quot;up and running <bracket> and </bracket> fully operational.&quot; All of its employees escaped safely.]

TSC: Len, you mentioned that you expect a V-shaped recovery at this point. Why, and is it possible at all to say when you expect the ascent?

Darling: The rationale for expecting a V-shaped recovery is threefold. One, monetary policy: The latest from the Fed is that they will make all the funds available for the markets to provide liquidity. The Fed did a similar thing in the Y2K event. The other two factors are some fiscal stimulus that we didn't have a month ago and a reduction in the price of energy.

If the scenario plays out as we would expect, we will probably see recessionary numbers of modest proportion in the third and fourth quarters of this year. I believe the first quarter of next year will be problematic, but by second quarter [we should see] positive GDP. And by the fourth quarter, we will be back to trend growth of 3%.

TSC: You said that prior to this event you didn't think the Fed had been aggressive enough in its previous seven interest-rate cuts so far this year, but that you do expect the Fed to be more aggressive now. How low do you expect the fed funds rate to go?

Darling: I think it [could go to] 2.50% to 2.25%, but I'm not sure that's as important as the directive to provide the liquidity that the markets need.

TSC: You and the three other executives who spoke at the conference call this afternoon spelled out your outlook for the economy, and the equity and fixed-income markets, as if the Sept. 11 attacks were isolated events and that this was the end of it. Do you want to address what might lie ahead?

Darling: In times of war, markets behave differently depending on the circumstances you go into. In the eight previous military conflicts, a year after the beginning of the conflict, the markets were either flat or up, with the exception of the Yom Kippur War in '73. In that war, inflation was a problem and interest rates rose. In World War II, we were just coming out of a depression. There was excess capacity, an easing of monetary policy and interest rates were down. The markets performed extraordinarily well in '42 to '43.

So if you go into a war with excess capacity, there is an opportunity for stimulation without inflation. If you go into a period of war where you [are already at] capacity -- like in Vietnam we had the phrase "guns and butter" -- then inflation rates go up and interest rates go up and markets don't do as well.

In sum, war doesn't determine the market. It's really the state of the economy as you enter it and what happens primarily to inflation.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.64 0.00%
FB $118.57 0.00%
GOOG $698.21 0.00%
TSLA $241.80 0.00%
YHOO $36.53 0.00%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs