Sneak peek 2008: Analysts say market and local economy bode well

All is well — well, mostly well — with the stock market and the local economy heading into next year, say Wells Fargo analysts.

With corporate profits growing much larger than expected over the past several years, Sterling Jenson, regional managing director for Wells Capital Management, said he's excited about the prospects for a big jump in the Dow Jones Industrial Average in 2008.

Likewise, the forecast for the local economy over the next six months is also mostly positive, particularly on the job front, said Wells Fargo vice president and economist Kelly Matthews.

"We're bullish on the stock market over the course of the next year," said Jenson, speaking to the media during a presentation of the Wells Fargo economic forecast and investment outlook for the first half of 2008.

"Corporate America continues to perform well and create earnings," he said. "We think earnings will be respectable."

Jenson then threw out 15 percent as a number, which while "fluid," is a reachable goal given current forecasts. "It's very doable," he said.

Ever the economist, Jenson hedged somewhat, suggesting predictions could change if other parts of the economy behave unexpectedly, such as the jobs sector. "If we get into a situation where unemployment starts to turn and gets worse and employment gains fall off, that will eventually affect corporate profits," he said.

The uncertainty of the national economy is more difficult to gauge — especially with fuel prices — which may cause people to shy away from from spending sprees and doesn't bode well for holiday shopping, he said.

"It's looking like it's going to be a relatively soft Christmas season because people are backing off of discretionary spending a bit," Jenson said. "We'll see it impact some retailers more than others."

Jenson said he expects the market to decline slightly in the next three months, with stocks beginning to rebound strongly and continue trending upward over the next year.

Matthews said Utah's employment picture is among the best in the nation currently and he expects average job growth in the next six months to be around 3.9 percent with hourly wage rates increasing 4.8 percent by midyear 2008.

But Matthews had words of caution about the housing market, which he says is at a crucial juncture right now.