•We are patient bulls on the medium-to-long-term prospects for US equities. • For some time, we have applied comparatively optimistic multiples ranging from 25 to 28 to estimates of the operating earnings of the S&P 500. Similarly, we have relied on the remarkable stability of the growth trends in US GDP and domestic consumption spending for our forecasts of the resilient growth in the profits of blue-chip companies. We see very little reason to change those assumptions for the second half of 2000. • One of our central ideas is that lower volatility in GDP and inflation trends translates into higher valuations in the financial markets. Lower volatility is one of the indirect benefits of heavy investments in technology and information systems; that investment spending, in tum, improves the predictability of corporate revenues and earnings. That is a key point, because “visibility” has long been associated with premium valuations at
