The bad news about the United States economy is already out in the open, and in spite of a significant slowdown, there is a case for optimism next year, according to SG Capital Markets' US chief economist. New York-based Stephen Gallagher said yesterday in Hong Kong there were mixed messages coming out of the US, but there was an overriding nervousness stemming from a shift in the economic picture. However, he remains optimistic for an improved second half of next year as the US Federal Reserve's rate cuts put the brakes on growth deceleration. 'I am more optimistic than I think what is currently priced into the US marketplace as I think we've become far too pessimistic on the whole outlook,' Mr Gallagher said. He cited energy prices and the US presidential election uncertainty as panic triggers that would - at a time of a more stable outlook - not be a cause for alarm. 'We've had the shocks. We've had Nasdaq [plunge], we've had credit become quite restricted and the presidential election - and we've had high oil prices,' he said. In a report, SG concluded: 'Foolhardy or not, SG is relatively optimistic about the economic outlook for 2001.' Mr Gallagher believes the uncertainty surrounding the election has been a great contributor to the fall in confidence in the US economy and markets. If the economy was on a high, as it was when the Monica Lewinsky scandal hit, such a voting debacle might have passed without greatly affecting consumer and market sentiment. But at a time when growth is declining and even Christmas shopping numbers have been a disappointment, the lack of an elected president was exacerbating nervousness. 'We were already nervous and slowing, so our reaction has been exaggerated,' he said. Still, he holds a personal view that once a decision is made on the election, it could quickly become a 'bad memory'. 'All we can hope is that it ends quickly. That we can get a president and [Alan] Greenspan will be ready to go into damage control.' A Fed rate cut of 25 to 50 basis points in the first half would be enough to counteract a harder landing scenario, he said. SG forecasts 3.3 per cent growth for the US in 2001 on the heels of 5.2 per cent this year. For economists in Asia, views on how such a slowdown is going to affect economies differ. Some say the region is in for a shock and although a soft landing in the US is likely, that will still have a marked effect on export demand for information technology (IT) goods from countries such as Korea and Taiwan. Mr Gallagher said next year would be a tougher time for IT exports, but he did not foresee a massive downturn. 'Much of the equipment that we use - the hardware - comes from Asia and it will slow . . . but to me, it's going to be one of the areas that is protected,' he said. 'It depends on which country you're talking about as they have all had different recoveries since the crisis, but I don't think you're going to see them going back [to crisis levels].'