Approaching consensus: Gurus say the recession is over

The performance of the Dow Jones Industrial Average —up 12% for all of 2009—and other broad market indicators, are evidence that the recession is over and normalcy is returning to both the stock market and the economy, according to some industry experts. The stock markets' rise is evidence “the recession ended in the second quarter, and we will have positive [gross domestic product] growth in the third quarter,” said Fred Fraenkel, chairman of investment policy at the Beacon Trust Co., an investment management firm with $1 billion in assets. “Third-quarter earnings will be better than expected, made up not only of further productivity gains, but also of top-line growth,” said Mr. Fraenkel, who was head of global research for Lehman Brothers Holdings Inc. from 1987 to 1993, said today in a research note. Other industry watchers are of a similar opinion. It appears likely that the recession ended in June, David Pedowitz, portfolio manager at the Bolton Group, a unit of Neuberger Berman LLC, said today in a research note. The residential real estate crisis has bottomed, the employment crisis is over and consumer spending habits will return to normal, he said. The economic recovery will generate GDP growth of 3% to 4%, Mr. Pedowitz predicted. “It is certainly too early to declare victory, given high unemployment, large deficits, depressed consumer spending and uncertainty on many fronts,” Bob Doll, vice chairman and global chief investment officer of equities at BlackRock Inc., noted today in his weekly investment commentary. “But we would argue that we are back on the road toward a restoration of normalcy and have been moving much faster than we could have anticipated six months ago,” Mr. Doll added.