Economist says recovery should begin in fourth quarter
Barring a prolonged war in Iraq, the US stock market will begin rebounding in the fourth quarter and continue building strength throughout 2003.
That’s the general assessment of Bruce Bittles, chief equity strategist for Robert W. Baird & Co. Inc., Milwaukee.
Bittles believes the market bottomed out in July, hit a predictable speed bump in historically underperforming September, and will take a definitive upward turn in the final months of the year.
"I still think the economy is going to do better going forward, only the recovery will be slower and more hesitant than expected," Bittles said.
"From the fourth quarter and subsequent quarters of 2003, the economy will pick up as we go along."
Stocks for companies selling consumer goods – retail, home improvement, home furnishings, etc. – will be the first to substantially rebound, Bittles said.
The manufacturing sector will then recover after consumer demand picks up, Bittles said.
"The consumer typically leads a recovery," he said.
Another terrorist attack on American soil would not make a significant long-term dent in the stock market, because most equities have corrections "built-in" from the Sept. 11, 2001, attacks on the World Trade Centers in New York and on the Pentagon, Bittles said.
A quickly fought battle in Iraq also would not derail the US stock market’s recovery, Bittles said.
However, a prolonged war in Iraq could have serious negative consequences on the stock market, he warned.
"If the war should go poorly for us, and we were to get bogged down over there, that would have significant impact," Bittles said.
The overall economy in southeastern Wisconsin already may have begun its rebound, according Bret Maybourne, economic research director of the Metropolitan Milwaukee Association of Commerce.
Mayborne monitors 13 business activity indicators in the Milwaukee area, and seven of those indicators improved in July over their levels from the same period a year earlier.
"For the first time since December 2001, a majority of available local indicators monitored by the MMAC improved from year-earlier levels," Mayborne said.
Mayborne reported increases in nonfarm employment levels, service sector employment levels, the lengths of a manufacturing production worker’s workweek and weekly earnings, existing home sales, the number of mortgages and new car registrations.
However, passengers using General Mitchell International Airport declined 3.2% from a year earlier, and the value of local construction contracts dropped 38%.
Sept. 27, 2002 Small Business Times, Milwaukee
