BMO Nesbitt Burns is predicting that the U.S. bull market will resume in 2003.

In a new report, Cooper says “The combination of aggressive Federal Reserve easing and impressive fiscal stimulus will assure that the economy revives from what will likely be a disappointing fourth quarter.”

Cooper says the Fed is likely finished easing interest rates, but notes that the Fed is not the only player here though. “Powerful monetary stimulus already in the pipeline,” she says.

“On the horizon are a $50 billion tax cut and extended unemployment insurance benefits. Expect quick action on prescription drug benefits. Also likely are preferential tax treatment for dividends, expanded 401K allowances and possibly a reduction in capital gains tax rates. The earlier tax cuts, now slated to expire in 2010, will be permanently enacted, including the elimination of the estate tax.” Cooper calls the Republican sweep of the recent U.S. Congressional a strong affirmation of the economic policies of U.S. President George Bush.

Cooper predicts that, in response to low interest rates and the massive cost cutting in Corporate America, corporate earnings will begin to surprise on the high side. “We have already seen a rebound in profit margins from rock bottom lows, not because of pricing power, but because of dramatic cost cutting.”

“In this environment, stocks will outperform bonds for the first time in four years. As we move into 2003, we will start to see a growing tide of upside earnings surprises,” Cooper says. This will, in turn, trigger the beginning of a bull market in stocks, she concludes.