US Economic Recovery Done, New Bullish Cycle Ahead: Analyst

The U.S. economic recovery is done, and the economy has begun a cycle domestic consumption-led growth that will differ significantly from the prior cycle that ended in 2008, said Michael Shaoul, chairman of Marketfield Asset Management, a New York investment advisor.

The development conforms to the typical pattern whereby the U.S. economy suffers crises, recovers from them and eventually enters into new growth cycles.

Around 1995, the U.S. economy moved beyond recovering from the savings and loan crisis, which saw the failure of over 700 U.S. financial institutions, to a tech-fueled cycle of booming growth.

Around 2003, the U.S. economy moved past recovering from the dotcom bust into a real estate and Wall Street-led growth cycle.

Now, early in 2012, the U.S. economy is moving beyond the global financial crisis of 2008 and is entering a cycle of growth led by broad-based domestic consumption, said Shaoul.

The Federal Reserve's ultra-easy monetary policy -- keeping short-term interest rates near zero and lowering long-term interest rates through quantitative easing -- has helped, he said, by fixing the very broken parts of the economy, like housing, and providing extra fuel for relatively healthy sectors like manufacturing.

For example, U.S. job creation in manufacturing in the last 12 months was the best in 15 years, said Shaoul.

The ultimate driver of this new economic cycle, though, will be domestic consumer spending, he said.

Shaoul is also bullish on German and U.K. consumers but bearish on emerging market consumers because these countries were on a credit-fueled binge in the last few years.

U.S. consumers' current financial obligations to disposable income ratio is the lowest since 1984. Credit delinquency is the lowest level since 1994.

Moreover, the recent housing bust -- which initially dented consumer spending -- now supports consumer spending because housing costs became dramatically lower for Americans, especially young workers purchasing their first home, argued Shaoul.

He names clothing and manufactured goods as two sectors that could benefit from the coming U.S. consumer-led economic boom.

He also believes technology -- in fields like information and healthcare -- could also generate tremendous wealth in the coming cycle.

Along the way, he expects corporations to earn more than their fair share of money and is thus bullish on U.S. equities. By the end of this consumer-led economic, he expects valuations on successful technology and consumer stocks to become quite stretched.

Shaoul's bullish view on U.S. equities is not uncommon. Loomis Sayles, a Boston-based investment management firm, thinks equities will perform well and the U.S. economy will continue to grow for the foreseeable future.

Central to the bullish investment thesis of Loomis, presented at a media event earlier this week, and many other experts, however, is attractive valuations, as U.S. equity share prices are at only 13 times corporate earnings.

Unlike Shaoul, though, most equities investors are not banking on a consumer-led economic boom.