Picking the Winners In a Growing Economy
The U.S. economy, finally kicking into higher gear, is presenting investors with a challenge: how to learn to enjoy good times again.</br></br>After five years of sub-par economic expansion, the recent report of November's drop in unemployment - the sharpest monthly decline in a decade - suggested that 1994 growth expectations should be revised upward.</br></br>Instead of 2.5 percent to 3 percent real growth in gross domestic product next year, some economists say the surprise could be that the U.S. economy does significantly better, perhaps 4 percent. In a $5 trillion economy, adding a percentage point to growth is a very big deal.</br></br>Yet therein lies the seeming paradox for investors: Faster growth has not been a good friend to stocks in recent history. Instead, the market has fared best in periods of slow growth.</br></br>Since 1975, the blue-chip Standard & Poor's 500-stock index has posted total returns of 15 percent or more in eight of 12 years when GDP growth was 3.4 percent or less.