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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

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 grossdomesticproduct growth by the fourth quarter, says Len Darling, the chief investment officer for OppenheimerFunds.

Len Darling
Chief Investment Officer,
OppenheimerFunds
Recent Daily Interviews
Montgomery Funds'
Bob Rezaee
Morningstar's
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 headquarters were destroyed in the World Trade Center attack, was "up and running [and] fully operational." 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 federalreserve 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 fedfundsrate 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.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs