Recovery Expected in 2009 But Unemployment to Lag

The U.S. economy will begin to recover by the end of the year but unemployment is another matter, fund managers speaking at the Morningstar conference said.

Growth will be sluggish, however, and more financial services regulations will be put in place, they said.

As consumers continue to pay down their debt, the nation’s GDP will grow at 1% to 2% a year, rather than the historical 2% to 3%, said Bill Gross of PIMCO. “Our inclination to shop and to consume basically was exaggerated to an extreme proportion,” he said. Going forward, he said, “Growth will be stunted. It will be a different type of world, and we have to get used to that.”

Gross added that 401(k) balances will take years to recoup the average 41.4% losses experienced since the Dow reached a record high in October 2007.

Other speakers, however, were far more optimistic about the market outlook, citing bargain prices. “The reset button was hit in September,” said Tom Marsico of Marsico Capital Management. “Valuations, especially in financials, are as compelling as I’ve ever seen.”

Jeff Mortimer, chief investment officer of Charles Schwab, added, “The market is clearly saying the worst may be behind us, “though that doesn’t mean good times are ahead.”