After two consecutive years of losses on Wall Street, investors and economists are optimistic in the new year, predicting an end to the nation”s current recession and forecasting growth in many areas of the economy.
“The consensus is that we will see a modest recovery,” said John Schmitz, head of equity strategy at Fifth Third Bank in Cincinnati. “We faced 2001 as a year of restructuring. This year will be driven by inventories being replenished over the whole year.”
Schmitz noted that this recovery will be unlike its early-1990s predecessor, in part because “debt level is high from consumer spending and valuations are still high. What matters is how well earnings rebound.”
Thomas McManus, chief investment strategist at Bank of America
Securities in New York, said he expected markets to increase by as much as 10 percent.
Schmitz echoed this sentiment, predicting “below-average market increases.”
Economists remain positive despite a recent flurry of bad news, including the Labor Department”s announcement Friday that the nation”s unemployment rate rose to 5.8 percent last month, a level not seen since August 1995. Also Friday, AT&T reported plans to lay off 5,000 employees in an attempt to reduce costs.
But Schmitz pointed out that consumer confidence remains strong and the economy”s loss of 124,000 jobs in December was the smallest decline since August, news seen by many as a sign that the job market may be stabilizing after drastic post-Sept. 11 cutbacks.
Economists are also overlooking the federal government”s failure to pass an economic stimulus bill.
“I don”t think the bill that was being talked about would have been very stimulative,” said McManus. “What stimulus there was appeared to be mistargeted.”
Locally, Ann Arbor retailers and businesses have a mixed outlook for 2002.
Dan Switzer, a manager at Steve & Barry”s on South State Street, noted that the store had a tremendous holiday season.
“We posted a significant gain,” Switzer said.
But unseasonably warm December weather has some retailers singing the blues.
“Weather plays a major effect,” said Ed Davidson, owner of Bivouac on South State Street, an outdoor apparel company. “When it”s 60 degrees in mid-December, it hurts me and there”s not much I can do,” he said, adding that he thinks 2002 is going to be a “tough year” for the store.
McManus and Schmitz both said they feel the economy might be getting ahead of itself. But as Schmitz noted, “We have not had three straight down years since the 1930s.”