The people in Bangkok spent nearly $37 million on fortune tellers in 2002, a sign that many people remain wary of the country's nascent economic recovery, according to a poll by the Thai Farmers Research Center. The amount spent on "divination services" represented a 50 percent increase over 2001, the year in which the Asian economic crisis began with the devaluation of the Thai baht currency,
"People seek solace in fortune telling," the report said. Thai officials forecast economic growth at around 5 percent this year, compared to 1.9 percent last year.
So, that’s Thailand. What can we expect here? For one, MSNBC, in a recent poll, says that in response to the question of how optimistic Americans are about the economy in 2003, some 56 percent answered in the affirmative. But, what do the business economists say?
Most expect the economy to grow about 3 percent to 3.4 percent in 2003, slightly above the estimated 2.7 percent growth in 2002, and 0.1 percent of the 2001 recession year. The forecasts factor in some limited tax cuts by Congress, ranging from reduced payroll taxes to investment tax credits to possible extension of unemployment insurance benefits.
Richard Berner, chief U.S. economist at Morgan Stanley. "If we get 3 percent growth, it's not enough to significantly lower the unemployment rate, though it is enough to keep it from rising appreciably further." Berner also notes that U.S. corporations and consumers are carrying a lot
of debt. "Corporate balance sheets are heavily leveraged, and so are consumer balance sheets."
My friends in London see a somewhat different picture. Many European money managers say that the U.S. economy is sailing free from the doldrums, modestly boosting prospects elsewhere and allowing for some renewed company growth that would strengthen equities and corporate bonds and weaken the bull market in government debt.
"It was the same last year," maintains Jacob van Duijn, chief investment officer for Dutch fund Robeco. "Whatever salvation had to come out of the U.S. It is more true today because the European economies have been quite disappointing."
Volker Dosch, senior fund manager at Germany's DWS Investment, believes that the U.S. economy will probably not move back into recession. "The problem will be that the expectations in part of the market will be high." Andrew Clare, financial economist with Legal & General Investment Management, in predicts "respectable" U.S. growth.
Keep in mind that investors, depressed by three years of losses on Wall Street, might take heart in what some analysts are expecting in 2003: A return of the bull. With positive reports on earnings, the market's optimists believe stocks will start charging again. But other more cautious analysts warn against unrealistic expectations--a bull in 2003 will likely be tamer than the one that sent stocks roaring in 1999.
Analysts also point out that the market has several factors in its favor going into 2003, among them improved earnings, a strengthened economy, and interests rates low enough to motivate companies and individuals to spend more.
Moreover, Wall Street has history on its side. Four-year slides are rare--so much so that the Dow Jones industrials have seen only one, which spanned 1929 through 1932. And, there have been only two three-year declines, 1901-1903 and 1939-1941.
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