Government Spending, Capital Investment to Lead Recovery

Just as the financial crisis is unprecedented, the recovery is also expected to chart new grounds, the St. Louis Post-Dispatch reports.

Government spending and capital investment will lead the way out of the recession, followed only much later by a return to robust consumer spending, according to experts. GDP growth will remain in decline this year and rebound only modestly in 2010.

Wells Fargo Senior Economist Gary Thayer believes the economy will contract 2.7% this year and then grow 2.1% next year.

Consumers are still deeply in debt, Baby Boomers realize they need to save more to be even remotely prepared for retirement, the housing market is still declining and banks remain tight with credit.

As a result, the market will make a series of halfhearted advances and then retract, says Bill Greiner, chief investment officer at UMB Asset Management. However, he is bullish on equipment makers and computer technology companies.

Charles Rice of Rice Money Management believes that mutual funds tied to specific investment styles will falter in the coming months. Instead, he likes world allocation funds that have more leeway.