Next quarter the shrink rate is projected to be 2%. After that, the consensus is for the economy to expand in the second half of 2009, although it won't be much: 0.5% growth in the third quarter and 1.8% in the fourth.
There are plenty of doubters. Maria Fiorini Ramirez, head of economic forecasting firm MFR Inc. in New York, sees the economy continuing to contract in the second half, at a pace of 1.5% in both the third and fourth quarters.
Despite the recent bump in consumer spending, Ramirez doesn't see Americans having the wherewithal to spend enough to restore economic growth this year. With job losses rising, incomes will continue to be squeezed, she said: "We think the consumer's hands are tied."
If more investors come over to that view, and doubt that a turn in the economy and corporate earnings will happen before 2010, this month's jump in stock prices may fizzle just as the last four rallies did.
Still, if Wall Street at least believes that the economy isn't about to fall off another cliff, the market could just be set to bounce along in a relatively narrow range -- paradise for traders (or so they may think), but frustrating for investors who badly need to make up their devastating losses of the last 17 months.
It might be easy for many investors to conclude that a trading-range market would be only slightly less aggravating than another full-on bear market plunge, and that it would be better to just exit stocks altogether.
Human nature being what it is, however, you'll always wonder if the next upturn in prices will be, at last, the one that sticks. After a horrid bear market, you have to be very risk-averse -- and very resolute -- not to want any stake at all in the equity game.
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tom.petruno@latimes.com
