An expanding roster of heavyweight investors are betting that the economic recovery taking shape in the U.S. will be much stronger than is widely believed. The growing bullishness among major investors follows a wave of optimistic economic data that suggests prior views of muted recovery might be far too gloomy.

On Thursday, investment bank Societe General said that the U.S. economy is poised for a solid rebound after falling of a cliff last winter. Societe General's argument for a "classic" recovery -- one that tends to be as sharp as the drop is steep -- challenges the widely held assumption espoused by bond giant PIMCO, among others, that investors should brace for a "new normal" era of limping growth.

PIMCO's Bill Gross has argued that any economic recovery would be heavily subdued under a "new normal" because of the unique obstacles this time around ranging from high unemployment to government regulation.

But while that view went largely unchallenged during the depths of the economic malaise, more big-name investors are now countering that the recovery will be just "normal." And given the sharp 6.4% plunge in gross domestic product during the first quarter of year, a strong rebound should follow if past economic cycles are indeed any guide.

A Hiring Boom and 8% Growth?

On Wednesday, for example, investment banking giant Credit Suisse (CS) forecast that the benchmark S&P 500 index would hit 1,100 by the end of the year and 1,150 in 2010. In a research note, the company said that it expects a hiring boom as companies splurge on capital expenditures, thanks to the massive piles of cash sitting in their coffers.

But high-profile investor Bill Miller, chairman of the Legg Mason Value Trust fund, has taken aim at the "new normal" normal view most directly. While PIMCO has said that investors should brace for anemic economic growth of between 1% and 2% for the foreseeable future, Miller argues that a look at the history of economic recoveries would suggest a growth rate of around 8% for the coming year.

PIMCO is ignoring history and taking a much too narrow and pessimistic view of the recovery, Miller told clients in a research note at the end of October. And recent economic data suggest that Miller and other high-profile bullish investors might be right.

On Thursday, for example, the Labor Department reported that the number of newly laid-off workers dipped to its lowest level since January, an outcome that was more positive than economists had forecast. And retail sales posted their strongest performance in a year.

A String of Strong Reports

Thursday's data, which led to powerful gains in the stock market, come on the heels of better-than-expected readings for other key gauges like home sales and the Chicago Purchasing Managers Index.

While the economy shows signs of turning, soaring unemployment -- typically a lagging indicator -- continues to cast a malaise on investor sentiment (and all eyes will be on the October jobless numbers due out on Friday morning). But that's more normal than new, bullish investors would argue.


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