From bear to bull?

• Author: Fields, Melissa O'Brien
• Position: Investing

THE PROGNOSTICATORS ARE AT IT AGAIN -- buzzing about an economic recovery that is supposedly right around the corner. But this time, despite all the negativity surrounding talk of the market these days, it looks as if there may be some merit to a sunnier economic forecast materializing sometime in the not-so-distant future.

Many economists are targeting fiscal 2003-2004 as when the recovery of the state and national economy will become more discernible, increasing from its current snaillike pace to more of a brisk walk. According to several local investment professionals, the key to an economic recovery is working our way through oversupply created in the late 1990s. This glut in the system, so to speak, occurred when the economy started to slow leading up to Y2K and supply quickly exceeded demand. "Economic growth is typically indicated by a rise in the gross domestic product," says Clint Cannon of Cannon & Tingey Investment Advisors. 'And growth has been occurring, we just haven't been able to experience it yet because we're still working through surpluses in the system."

So, if all goes well on the international front and the economic fat is finally trimmed by the end of the year, where can investors expect to see improvement first? In several sectors, according to Cannon and other Salt Lake City market analysts. But technology is one area to watch closely, they say

Although deferred spending has been prevalent throughout the economy, it's been particularly tight in the technology area. "Just prior to 2000 was the last time many companies upgraded their computer systems," says Sterling Jenson, senior managing director of Wells Capital Management. Since software development has continued at a rapid clip, most 1999 and 2000 computers are not equipped to operate 2003-generation programs. 'This discrepancy will force many corporations to loosen the purse strings and purchase new hardware to stay competitive," Cannon believes.

For obvious reasons, companies involved with national defense and the new Homeland Security division of the federal government are expected to experience steady growth and activity into the next year. "Because of ongoing threats of terrorism, this industry will probably continue to grow regardless of what happens in the Middle East," says Kelly Matthews, executive vice president and economist for Wells Fargo.

Manufacturing is another area expected to see improvement. Cannon says those manufacturers who've managed to...