Cue the robust economic recovery!
I am sometimes asked how BizTimes was among the first to ascertain that an economic downturn had begun in 2008, even though many were defending the fundamentals of the economy. Similarly, we were among the first to proclaim that a recovery had begun in January 2010.
One of the reasons we have been in front of the economic curve is we hold our readers - the owners and managers of privately held companies throughout southeastern Wisconsin - close to our vest.
The other is we constantly monitor the assessments of some very bright economic forecasters.
Foremost among those forecasters is Peter Morici, professor at the Smith School of Business, University of Maryland, and former chief economist at the U.S. International Trade Commission. Morici first popped up on my radar screen when he was honored as the most accurate economic forecaster by MarketWatch.com.
I then began to see him and his forecasts appearing on cable news channels, and I subscribed to his e-newsletter. Along the way, we have exchanged a phone call and e-mail or two.
So, without further ado, what does Morici foresee for the rest of 2010? Recovery, indeed! I'll stand out of his way, and you can judge for yourself. Let the bulls run, baby! Here is Morici's latest forecast:
"Now that stocks have made up all their lost ground, what's next? Good things! Long-term doubts about the efficacy of the Greek bailout, huge U.S. budget deficits and monetary ease, and oil gushers not withstanding, we are in for one heck of a ride the balance of this year.
"A moderate recovery-three percent GDP growth-and much more robust growth in Asia are good for the profits of large U.S. multinationals. S&P 500 companies earn about half their profits abroad, and the economic recovery is strongest in China, where U.S. companies are quite well positioned.
Seventy-seven percent of the S&P 500 companies that have reported first-quarter earnings have outperformed analysts' estimates. Add low inflation and a favorable interest rate environment into 2011.
"For all the chatter about the Fed injecting too much liquidity and instigating inflation, consumer prices, less petroleum products, remain remarkably tame for now. And gasoline prices are now expected to decline for the summer driving season.
"The Federal Reserve can focus on boosting employment and wait until early next year, or even later, to address price stability. It will likely hold short rates near zero until 2011, and international investors seeking safe haven in the dollar will keep U.S. long rates low through the end of the year too. Corporate bonds are finding ready buyers again, and investors will continue to accept lower premiums for risks on long-term company debt than in 2009.
"All that will drive U.S. private money off the sidelines and back into U.S. equities. Doubts about Chinese and other Asian stock and real estate markets will drive smart foreign money to the companies that can exploit Asian growth but are insulated from the vagaries and potential missteps of state directed capitalism in China and elsewhere. U.S companies with significant market presence in China and elsewhere in Asia will attract big foreign capital inflows. Manufacturing is expanding again, and these businesses have learned how to get by with a lot less labor. Manufacturing profitability should improve strongly.
"Like it or not, President Obama's new health plan is law and that removes much uncertainty for the pharmaceutical, health device and insurance industries. Robust innovation continues in the pharmaceutical, microelectronics, consumer device, auto, and materials industries.
"For all the epitaphs written about American engineering leadership, Intel, Apple, GE, and other U.S. companies continue to lead. Ford is the poster child for American industrial recovery, and GM is poised to gain market share too, without the usual pricing gimmicks. "The market value of U.S. intellectual property continues on a straight north compass, significantly raising the intrinsic values of many U.S. companies.
"Residential construction is stabilizing. Non-bank financial services are doing even better. Investment banks may need better regulatory moorings, but American financial engineering remains a value harvesting machine.
"The ride may be bumpy, but the Dow is headed for 12,000 by years end and 13,000 in 2011."
There. This morale boost provided to you. No charge. Have a nice day.
Oh, by the way. Now that we know the recovery is kicking into gear, I invite you to attend the "BizTimes M&A Forum: Buy? Sell? Hold" at the Pfister Hotel, 424 E. Wisconsin Ave., Milwaukee, on Wednesday, May 19.
If you are even vaguely thinking about buying or selling a company in the next five years, you owe it to yourself to be there. Keynote speaker Mark Herndon, president of Dallas-based Parkwood Advisors LLC, a financial services firm specializing in mergers and acquisitions, investment banking and private equity financing, will be the keynote speaker. His address will be followed by breakout sessions led by experts from Reinhart Boerner Van Deuren Attorneys at Law and Northern Trust Bank.
To register, visit biztimes.com/site/m-a-forum.
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