By Jennifer Leigh Parker, Special to CNBC.com
NEW YORK ( CNBC) -- The new normal is looking a little old hat. The catchy and no doubt memorable phrase coined by Pimco boss Bill Gross amid the financial crisis is rapidly disappearing from Wall Street's lexicon -- and probably Davos' as well. And that's probably a good thing. With the Dow having almost doubled from its crisis low of 6,500 and many economists calling for solid U.S. GDP growth in 2011, the new normal -- "half-size economic growth induced by deleveraging, re-regulation, and de-globalization" -- has lost a lot of its usefulness.
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Tobias Levkovich, chief U.S. equity strategist for Citigroup ( C), argues that both consumption and corporate investment will eclipse the government's spending hole and will allow for sustainable growth. "Corporate confidence is coming back. We should get more durable
growth now, given that credit conditions are improving," says Levkovich. "If you are waiting for bank lending to improve, you've waited way too long. Look at the Federal Reserve Board's bank lending standards for commercial loans. Improved credit conditions lead business activity; hiring trends by 9 months, loan activity by 18 months." On the heels of JPMorgan Chase's ( JPM) Q4 earnings report, announcing an unexpected increase in loans, it looks like banks are in fact beginning to loosen their purse strings. FAO Economics Chief Economist Robert Brusca is among those predicting 4-percent GDP growth this year, because of strong investor demand and the prospect of consumption going up. Brusca doesn't think turning off the faucet of government spending is such a formidable threat. "We'll pass the baton from government sector to private sector, if we get job growth. This is the image: Pushing a car up a slippery slope. I can see either side being right government spending vs. consumption , but not both at the same time. If you keep pushing to the right spot, we'll be in a place where the economy can sustain itself." "There is a much higher correlation between stock market growth and retail sales activity than there is between stock market and housing activity," adds Levkovich of Citigroup. So the stock market is both a feel good factor and leading economic indicator. There's nothing new about either of those things. The stock market rally peaked in late 2007, a year before the collapse of Lehman Bros. and the financial panic that knocked over other giant financial firms like so many dominoes. Of course, given the lightspeed of financial markets these days, nothing is new for very long. That my be the lasting new normal. "People come up with catchy phrases. I don't think its useful," says Brusca. "Pimco has been a believer in it. But they also forecast the recession long before we had it. They forecast the double-dip, it hasn't happened. But they're the gorilla in the room. You can't ignore them." -- Written by Jennifer Leigh Parker of CNBC