With all the talk these days of consumer confidence and investor sentiment improving, Wall Street strategists are not doing much to boost either.

In a research note Monday,

Prudential Securities

chief investment strategist Greg Smith wrote: "1Q was every bit as ugly as it was supposed to be. Analysts' forecasts for 2Q are for things to be even worse than 1Q." Nothing particularly rosy there, but at least the investment community can cling to hopes for a second-half recovery -- right, Greg?

Guess not. "It is hard to see a turnaround in 3Q, particularly because a lot of companies are scheduling nonpaid vacations for the 4th of July week and other summer downtime kinds of activities. So, at best, we are talking about turnaround, in terms of company fundamentals, in 4Q and maybe as early as September," the strategist's report said.

Smith expects the current quarter to be pretty grim and that the much-anticipated recovery may be delayed. "It is pretty hard to get too enthusiastic about the stock market," he wrote.

There's some relief, at least, in expectations that the markets won't tumble downward again. Smith predicted the market will move sideways to down until the end of the summer, and added, "Only special events could possibly change that. And they would have to be pretty important special events." Like the end of the world, Greg?

Score One for the Dubya

Richard Berner, an economist at

Morgan Stanley Dean Witter

, wrote that "tax rebate talk is all the rage in Washington. Coupled with the permanent tax cuts we expect next year, a sizable tax rebate could bring forward the economic rebound we expect in 2002."

Did you say 2002? What happened to the second half of this year?

Berner thinks a tax rebate alone would likely be converted largely into savings and not spending. "So one might conclude that a rebate in 2001 would not stimulate spending much." He goes on in his recent research report, however, to explain that "if consumers look at the rebate as a down payment on or acceleration of permanent tax cuts, it could be highly stimulative."

Berner said this combination of both monetary (interest-rate cuts) and fiscal (tax cuts) policy is necessary to get the economy back on its feet. The suggested tax cut, he said, could work as the equivalent of a 75 basis-point drop in interest rates. "So, a sizable tax cut might act as a substitute for a 3%

fed funds target."

If the

Fed is nearing the end of its easing cycle --and after five rate cuts in five months, that seems likely -- the economic savior may be shifting from Sir

Greenspan to

Captain Bush

. Now we can all rest easier.

The Optimistic Contrarian

The light at the end of the tunnel this week turned out to be Joe Kalinowski, U.S. equity strategist at

Thomson Financial/First Call


In a report on the impending second-quarter preannouncement period, Kalinowski wrote, "The second-quarter confession season is off to an early start with 504 total preannouncements of which 104 (21%) are positive, 320 (63%) are negative, and the remaining 80 (16%) are comfortable with consensus." Preannouncements are when companies rush out to warn that upcoming financial results are going to be different than expected.

At first glance, his figures just don't look pretty. But, according to Kalinowski, the earnings warnings are trending toward smaller

cap companies, which will have less effect on the major stock market indices. "Should this trend continue, we believe the second-quarter preannouncement season, despite an expected greater number of earnings warnings, will not be as severe as the first quarter."

The upshot: "In sum, we anticipate that the worst is behind us, both from a price standpoint and an earnings revision standpoint."