The evidence keeps piling up that the U.S. economy has reached bottom and that a recovery of some sort is in the cards for the second half of this year.
But that's where the consensus ends. The shape of any recovery remains a matter of heated debate on Wall Street.
As my colleague Don Lee notes in his front-page story today, the "robust recovery" camp was buoyed Friday by the government's data on second-quarter gross domestic product.
Although the report estimated that the economy contracted at a 1% annualized rate in the quarter -- less severe than the 1.5% drop that analysts generally had expected -- the government also revised previous GDP data lower.
The end result is that the recession that began in late 2007 has been worse than the initial estimates indicated.
That, however, raises the possibility of a V-shaped rebound, because deep recessions typically have been followed by fast comebacks.
But as everyone knows, the backdrop for this recession has been anything but typical. The credit-market meltdown and crumbled real estate prices have financially ruined or crippled millions of Americans and an untold number of businesses, large and small.
The expectation of sustained aftereffects from those shocks has left many economic forecasters doubtful that a V-shaped recovery is possible. Most have taken up residence in one of three other camps named for the letters that describe the pattern that economic growth (or the lack of it) could take: U, L or W, the latter indicating a bet that any near-term recovery would be quickly followed by another recession in 2010.
If you're trying to make investment decisions based on the assumption that some kind of recovery is imminent, there are at least three things you can count on in your planning, regardless of the letter camp you're in:
* The Federal Reserve will not be raising short-term interest rates any time soon from their near-zero levels. Even if the economy shows surprising strength in the second half, the central bank simply can't take the chance of causing an immediate relapse by tightening credit.
If the Fed was slow to raise rates after the 2001 recession -- and it was -- imagine the pressure on policymakers this time around, with the banking system still in a state of shock from the credit-market crash.
That means investors who have trillions of dollars sitting in money market funds and bank accounts can count on earning virtually nothing on that savings well into 2010.
