NEW YORK (Reuters) - The stock market has a poor record of predicting U.S. recessions and is likely sending false signals again, according UBS strategists, who expect the S&P 500 index to post double-digit gains by the end of 2011.
Excluding the current downturn, the S&P 500 has shed more than 17 percent 14 times since the end of World War Two, but the economy only fell into recession on nine of those occasions, equity strategists of the Swiss bank wrote in a research note published Thursday. "Put differently, the market predicted roughly a third more recessions than actually occurred," they wrote in the report, entitled "14 of the last 9." After hitting a 2011 high around 1,370 in May, the S&P then shed more than 15 percent by mid-August, as signs of weaker U.S. growth sapped sentiment and the S&P ratings agency stripped the United States of its top-notch AAA credit rating. The market has climbed about 8 percent since August 22 and was trading Thursday at 1,216.83. UBS notes that in the five instances since 1945 when a steep market decline did not precede a recession, stocks rebounded by 15 percent in the next four months and 28 percent over the next year, UBS said, adding The strategists expect the latest downturn to be another false alarm, "setting stocks up for double-digit gains to close the year." http://www.reuters.com/article/2011/09/01/us-markets-stocks-recession-idUSTRE7804H020110901 '+'
