Growth Goblins Return

By Dave Kansas ,

Ah, remember the talk of recession just weeks ago? Well, forget about that. Now people are chattering on about economic growth gaining the upper hand in 1997.

What has investors addled is the potential return of the Roachian growth thesis.

Steve Roach

, the chief economist at

Morgan Stanley

, has made a long, hard (and thus far not-quite-correct) case that the U.S. and global economies would grow at a quicker clip than most expect. That, in turn would drive up interest rates and pinch the stock-market rally in the U.S.

On the last day of 1996, the Roachian view received a boost. New single-home sales for November soared 14.2%--the strongest such gain since April 1993 and far beyond the 5% expected rise. And consumer confidence, as reported by the Conference Board, came in at 113.8, up from 109.5 in November.

But investors ought to beware. The constant waffling back-and-forth between recession and rampant growth stems from the economy's uncanny ability to remain in a modest-growth range of about 2%-to-2.5%. Not used to such a stable growth rate, economists find themselves running all over the map trying to explain away a situation that really doesn't require much economic insight: steady as she goes.

But maybe it isn't just all those newfound growth worries that have Wall Street nervous about the New Year. His Incrementalist himself, Fed Chairman

Alan Greenspan

, finally proposed to

Andrea Mitchell

, the

NBC

correspondent, after a 12-year courtship. Irrational exuberance, anyone?

By Dave Kansas

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