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With the tone on Wall Street so bullish lately, and the market happily skipping to new highs, investors resting up over the long weekend for the week beginning Feb. 16 may wonder whatever happened to Asia.

It's not like the region has suddenly cured itself. This past week brought reports of food riots in Indonesia and labor unrest in Korea. On Friday, Tokyo's winning streak ended.

But let's look at it in a different way. The concern is that, as a result of the turmoil in Southeast Asia, U.S. companies' earnings growth slows -- either because the companies do business there, or because of deflationary pressures out of the region. If earnings slow down, then price-to-earnings ratios will start to look a bit rich and stocks would subsequently become more vulnerable.

So what? Worrying about price-to-earnings ratios is


1995. For the last three years, P/Es have steadily expanded. Why should this year be any different?

Transforming the Asian economic crisis into a P/E argument may provide valuable insight to investors. There's been a lot of grousing recently about how the market is being incredibly shortsighted, and it will get its comeuppance this spring, when companies report first-quarter earnings.

But perhaps the market is actually being rather farsighted, argues

Everen Securities

chief investment strategist Rao Chalasani. "The market is willing to look to and pay up for next year's earnings," he says. "We're seeing the P/E expansion that we've seen over the last three years continue to take place."

Chalasani adds that the Asian crisis is part of the current low-interest-rate picture. And lower interest rates, of course, support higher P/Es.

That this line of thought exists -- strategists already banking on 1999 earnings to support current valuations -- may be more important than the line of thought itself. It's not the kind of thing you would have heard a month ago. It testifies to the market's upbeat tone going into the coming week. Litanies of bullishness that haven't been heard since last spring all over Wall Street.

"Basically, the market is in great shape," says Chalasani. "Earnings season is behind us, there won't be any earnings-related shock until late February to March, the Treasury market's doing well, inflation is absent and liquidity is flowing into the market without too much hesitation."

And Chalasani is hardly alone. "I think it's positive," says Tracy Herrick, market strategist at


of the market's tone. "I think it's going to be positive through the coming month. The squeeze on profits everyone expects keeps getting postponed. You've got long bonds that are fairly steady -- the strength of the bond market will offset the worries over earnings."

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Herrick is putting his money in the software and instruments sectors -- for reasons that show you can take the strategist out of the

Cleveland Fed

, but you can't take the Cleveland Fed out of the strategist.

"The U.S. economy is in the latter stages of an expansion," he explains. Within that context, companies have to deal with labor shortages and the attendant bottlenecks in production. To boost production without having to go too heavily into the ever-shrinking labor pool, companies start buying things like production flow software.

In the Treasury market, things will likely stay pretty stable, according to

Chase Asset Management

chief market analyst Don Fine. "I think we're going to be in a range for a while until we know if Asia definitely will or definitely won't have an effect on the U.S. economy," he says. "Right now, we're sort of in a wait-and-see area."

That means that the market data will likely continue to take a back seat. The headliner next week will likely be the January

Producer Price Index

, released Wednesday -- a number that is likely to be bond-friendly. "Everyone I know is looking for a modest decline," says Fine.

Some economists have suggested that we will begin to get some notion of the Asian impact on the economy with Thursday's release of December

international trade

figures, but Fine discounts that. "I don't really agree with that," he says. "These things take a long time to unfold. I think the Asian impact on this item will be too small to ascertain."

Earnings season may be over, but the reports due in the coming week are, to borrow one of the Fed chairman's favored phrases, not insignificant.


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