DBJ... James Investment sees volatile economy

From Dayton Business Journal…

James Investment sees volatile economy in 2011

Wednesday, December 15, 2010

The economy’s recovery is not just around the corner, as many analysts are eager to claim, according to James Investment Research Inc.’s annual economic outlook.

Beavercreek-based James Investment instead predicts another volatile year in 2011, a year in which the U.S. economy has a 60 percent chance of bouncing along the bottom and only a 10 percent chance of a vigorous recovery. The likelihood of the economy taking a sharp downturn is 30 percent, according to the company’s forecast, which is developed using economic indicators.

The economy in 2011 is unlikely to go into a recession because it will be a pre-election year; only three times in 78 years has an economy entered a recession during a pre-election year. However, despite the benefits election-wary government has on the economy, a number of negative forces — oversaturation of the housing market; the high cost in time and money of federal regulations on businesses, namely small businesses; and a mounting federal deficit — will keep the economy unsteady.

“We don’t think we’re in another bull market,” said Michelle Kilchenman, James Investment Research marketing associate.

While the U.S. government’s regulation of business slows growth and increases unemployment, the Federal Reserve’s quantitative easing — and consequent weakening — of the dollar could have a positive impact on the economy, according to James Investment officials. The devaluation of the dollar should improve the market for exports, lifting the country’s $1.8 trillion in exports 11.2 percent.

Internationally, opportunities for investment will exist in select areas of Europe — Poland, Sweden and Turkey — and markets in Latin America — Chile and Peru, said Tom Mangan, senior vice president of James Investment.

The key to investments, both internationally and domestically, however, will be diversity, said Barry James, the company’s president and CEO. Because of the swings in the market, investors should avoid chasing stocks and spread their investments.

James Investment is the second-largest Dayton-area money management firm with $2.1 billion in managed assets.