Favorable Economic News, Decent Profit Reports, and Massive Money Creation Fuel Rising Stocks and "Reflation"--Harris Private Bank's April Outlook for Financial Markets

- Momentum for small caps beginning to fade, large caps expected to dominate capitalization

- Default by Greece would be unlikely to create much of a financial ripple

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Mar 12, 2012, 09:05 ET

CHICAGO, March 12, 2012 /PRNewswire/ -- Harris Private Bank's April Outlook for Financial Markets highlights economic news and discussions that include: The U.S. is seeing favorable economic news with stocks rising, fueled by decent profit reports and massive monetary creation. For now, the S&P 500's earnings has reached its highest level since June 2008 and remains about 13% below its all-time high reached in October 2007.

Other good news, households have paid down debt consistently for the last 13 quarters with the worst excesses being written off. Eventually, wages will rise as we enter the later stages of the recovery, however this will contribute to higher inflation levels.

The Federal Reserve has been fiddling with the Treasury market for three years; creating distortions with both intentional and unintentional consequences. The rally we are witnessing in crude oil against slightly higher interest rates is a byproduct of one of the Fed's intended consequences: asset inflation.

"If oil prices were responding to a heightened geopolitical threat as many are speculating, then it would seem that the price of Treasuries would rally in sympathy, yet they have been falling in the face of rising crude ," advised Jack Ablin, Chief Investment Officer, Harris Private Bank, and the author of the monthly report. "More likely, crude is rallying on the prospect of a debased dollar, and looking through this lens supports the "reflation" argument.

Additional key discussions in the April 2012 Outlook for Financial Markets include:

With an economy the size of Kentucky's, Greece is unlikely to create much of a financial ripple if it repudiates its debt. An avalanche of European sovereign defaults is doubtful.
The notion of lowering tax rates and broadening the base by trimming loopholes is a step in the right direction. Why not go all the way? Let's eliminate corporate taxes and make deductions and loopholes a thing of the past.
Here at home, no success goes unpunished. Washington is busy rolling out the red tape to punish the private sector for the bubble years. The regulatory environment, a key determinant of our country's national return on capital, is one of the key drives of secular stock market performance.
Momentum for small caps is beginning to fade. We expect large caps to dominate the capitalization race over the coming quarters.

The monthly report, which can be downloaded by clicking on the following url: http://bit.ly/yOczJH is created by Jack Ablin, Chief Investment Officer for Harris Private Bank. Ablin is responsible for establishing investment policy and strategy within the Personal Investment Management Group of HPB. He also chairs the HPB Asset Allocation Committee, which determines the strategy for investment portfolios for Harris Private Bank.

For more information on how Harris Private Bank can assist you in finding solutions that will help you meet your financial needs, please visit www.HarrisBank.com.

About Harris Private Bank, A part of BMO Financial Group
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SOURCE BMO Financial Group