US stock fall unpredictable

The US stockmarket will lose 15 per cent before the end of the year, however, the timing and the reason for a fall cannot be predicted, says BT chief economist Chris Caton.

The US stockmarket will lose 15 per cent before the end of the year, however, the timing and the reason for a fall cannot be predicted, says BT chief economist Chris Caton.

"A 15 per cent correction between now and the end of the year will drag our market down, but I expect it to bounce back," he told a Mel-bourne chapter FPA lunch.

Caton says he has factored this correction into his prediction of the All Ords reaching 3050 by mid to late next year.

Despite the long-awaited correction, Caton is bullish on growth with stronger figures predicted for next year. He sees world GDP growth at 2.2 per cent and Australian GDP growth reaching 4 per cent. In the US it will be 3.8 per cent. He believes most economists are too pessi-mistic about Japan and are tipping only 0.2 per cent GDP growth, a figure Caton believes is too low.

In Germany, growth is seen at 1.6 per cent, but Caton sees Europe performing stronger later next year and this will counter a downturn in US growth forecasts.

"In the US we are seeing the first signs of wage inflation and that will put pressure on growth," he says.

Asian growth figures are looking much more positive, with countries like South Korea being tipped to achieve 6.5 per cent growth next year.

"In the Year 2000, there will be positive growth in Asia and this is good news for Australia, especially with exports," Caton says.

"Investors shouldn't give up on Asia as we have already seen the dou-bling of many of the Asian markets in the past 12 months."