More Wall Street stalwarts now see a sharp economic recovery
Filed under: Economy, Investing
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.
D-Day for Harry Reid: Can he wrangle 60 votes for Senate health reform bill?
Fed stalls on Chinese bank deal, costs taxpayers $1.7 billion
Dell in a handbasket: Should founder Michael Dell resign?
Reader Comments (Page 1 of 2)
11-05-2009 @ 5:34PM
mdresch said...
Thanks Obama and the Democratic Congress for not letting the Republican recession turn into a depression. Like FDR, Obama has so far been a great president. Now if we can get health care, like the rest of the developed world so that our industry can compete on a level playing field, we will have a great economic expansion!
Reply
11-05-2009 @ 7:44PM
Carlos de Vasconcellos said...
When I see the door of the Airforce 1 747 open and instead of that idiot Bush come out with his smirk and I see instead President Obama I always say: "Thank You Jesus!" Like FDR, Obama is saving our country. No wonder ChenneyBush hates him so.
11-05-2009 @ 8:31PM
jackisbackprt4 said...
mdresch said...Thanks Obama and the Democratic Congress for not letting the Republican recession turn into a depression. Like FDR, Obama has so far been a great president. Now if we can get health care, like the rest of the developed world so that our industry can compete on a level playing field, we will have a great economic expansion!"=====True that! Now if the party of "no" doesn't have their evil and corrupt way, a good healthcare policy is there to be had!
11-05-2009 @ 9:16PM
vaughnvdg said...
Good post. Let's hear them NOW say DOW IS BACK TO 10,000 SINCE THE DARK DAYS OF REPUBLICAN RULE OBAMA OWNS THIS ECONOMY!!!!!
11-05-2009 @ 5:59PM
hey stud said...
Things are looking up!!!!!!!
Reply
11-05-2009 @ 5:53PM
Paul said...
Washington plans to expand the already bloated defense industry and have an economic expansion of the NATIONAL DEBT FROM THE CURRENT 12 TRILLION BORROWED TO 20 TRILLION BORROWED.NATIONAL DEBT.
Reply
11-05-2009 @ 6:13PM
Chuck said...
I work in a large box store and hear from people everyday who continue to lose their jobs, houses, cars, and declare bankruptcy. They would certainly challenge these " heavyweight investors" claiming that there is any economic recovery taking place at all. These figures that the so called expert prognosticators are using are nothing more than smoke and mirrors whose purpose is to give people a false sense of security. I find it interesting that this article has been written on the heels of the announcement by the government on once again the extension of unemployment benefits and now also the tax credit for new home buyers into 2010 rather than the end of this year. It seems there is enough fear on the part of the powers to be that they take this action. Shame on Mr. Kumar, author of this article, for not using some reasonableness check before penning this opinion by those clearly having everything to gain from a deception and much to lose if the facts are accurately challenged.
Reply
11-05-2009 @ 6:21PM
Dave said...
Chuck, I agree....the only economy improving is the fatcats'. and THAT is as you say, smoke. I sell 2 widgets a year until 2008 when I sell half a widget. Late 2009 I sell a whole widget. GET UP and dance baby....100% increase in sales (on half the work force....) The gap is a chasm and I don't see a closing of that chasm....ever....
Reply
11-05-2009 @ 6:32PM
R.J said...
Remember people, this is all taxpayers money out there and the taxes have not been collected yet. And I bet that there is not enough revenew to even pay the intrest. Just take A look and what is going on with the gold? Only A fool with no brain would not see this. Health care will be the straw that could break the camels back. And in no way can you compare it to when FDR was president.
Reply
11-05-2009 @ 6:52PM
hotrodqd said...
If you say so .......? how many unemployed waiting until the last minute with still granduer dreams of ...upgrading ???? = no work force ....for the cheap & greedy .......recover that !!!
Reply
11-05-2009 @ 6:55PM
hotrodqd said...
ya pump em all up ......get them hooked in jobs ...create a fiasco .....only to rip off theyre pensions - benefits-properties and expect them to come back again for more abuse and less ??? you are sooooo funny .....funny funny funny !!!
Reply
11-05-2009 @ 7:02PM
RJ said...
These guys must be on some heavy duty drugs................
Reply
11-05-2009 @ 7:22PM
andy said...
any wages increases in their crystal ball, I don't mean for them but for regular people. you notice how all the professional services went from an additional 100 dollars to 500 and up. Seems they're the only sectors that are getting increases while the middle class is falling back into the dark ages of serf and slavery
Reply
11-05-2009 @ 7:34PM
commoncents said...
Nonsense!
Reply
11-05-2009 @ 7:41PM
fakeconomics100 said...
This is one of the best article I have read in recent months. Yes I see a rebound in economy and it will get better. But consumers are much smarter now than ever before. Our GDP will be lower but economy will see a much stable and long lasting. Corporations who value consumers and who are reasonable will stay in business. Greedy banks, Greedy Oil and Greedy Insurance will bite the dust
Reply
11-05-2009 @ 7:46PM
fakeconomics100 said...
I ask all corporations who want consumers to be on their side------must state what is there for consumers? why should they buy your product? May be COST Plus will work---not prices based on speculators and day traders----They will lose
Reply
11-05-2009 @ 7:47PM
river racer said...
I want to thank the many of you who refuse to accept the economic recovery we are experiencing is real and also choose to participate in the new bull market. As a contrarian I appreciate the "wall of worry" you are providing. When you finally decide to get into the market, I'm sure it will be time to get out!
Reply
11-05-2009 @ 7:49PM
Tom said...
What the Republicans fail to tell you is not only did FDR increase spending to stimulate a struggling economy, but so did their great hero, Ronald Reagan. And guess what, it worked both times.
Reply
11-05-2009 @ 7:54PM
Allhail said...
The president and his advisors have taken the only prudent course, investing public funds to sustain the economy, and looking to jump start first the market and consumer confidence. Hopefully the public will have learned from the national pathology of trying to get rich quick, and will be more prudent in both spending, saving and investment. But that accompanied by consumer confidence could help restore the jobs for those suffering from the collapse of housing and the blue collar economy.
Reply
11-05-2009 @ 8:07PM
fakeconomics100 said...
We are for getting one thing----------Obama inherited a bad economy----Our treasury was empty, we spent two trillions in Iraq, biggest budget surpluses were tranformed into largest budget deficits-------Smallest Government was turned into the Biggest Government ever------We have let many greedy Oil companies merged--thus facilitated price fixing---We let speculators and traders dictae the market-----The damage done was monumental and catastrophic----America Held hostage by Greedy Health Insurance---Greedy Oil------Greedy Banks---Yes we have freedom with least options----Whom should we blame?? We have become a nation of 300 million partisan perverts who do not have guts to be honest jurors?? I am outraged---I blame the people who are still on sidelines
Reply