Git along, little dogie!

There's money to be made these days from a yet unwritten book: "How to Raise a Little Bull."

Wall Street, ever hopeful for signs of financial gain, is nurturing a renascent bull market now that most economists have declared that the recession is over, if there was a real downturn.

Political turbulence abroad provides a reason to be wary. But here he is, a baby bull that many money managers hope to turn into a full-size, rip-snorting gladiator like the one that galloped through the corridors of high finance in the late 1990s.

So far, things are looking only "so-so" for our pint-size four-footed friend: The Dow Jones Industrial Average and the Standard & Poor's 500 index, a broad measure of the market, have barely held their own.

The Nasdaq, a measure of the high-tech market, lags behind those indexes, but has shown some new energy lately.

Productivity remains high; business inventories are being worked off storeroom shelves; consumer confidence and spending have rebounded. "We're expecting a decent year" for investors in 2002, says Arnold Kaufman, editor of The Outlook, an analytical review published by Standard & Poor's Corp.

But if Wall Street is keeping a careful eye on its new little bull, it's because of a whole range of events going well beyond the US war against terrorism. The Enron debacle has tarnished the reputation of the accounting industry and raised questions about bookkeeping at other US corporations. The bankruptcy of long-time retailer Kmart created jitters about the durability of equally well-known firms. Oil prices have shot from $18 a barrel to about $27, yanking money from consumer pocketbooks.

Add to that the violence in the Middle East, which has the potential to pull the US into the fray and send oil prices into the stratosphere.

"While it is clear that the US economy is recovering, there is a real danger that this could all be a profitless prosperity – in other words, with the economy moving, but no one really making money on it," says Larry Wachtel, a market commentator for investment house Prudential Securities.

Without question, "profitless prosperity" – a new buzzword on Wall Street – would quickly curb the grazing territory of the baby bull. "That's why many institutional investors are now saying that there is no particular reason for them to jump back into the stock market at this time," says Mr. Wachtel.

In essence, investors are asking bull- market backers: "Where's the beef?"

Even bullish analyst Ralph Acampora, who heads up technical analysis for Prudential, sees the need for defensive positions during the spring, such as the precious metals and energy sectors. Not surprisingly, he sees the likelihood of a slight new high by the end of the year, with the Dow moving toward 12000.

For the first quarter of 2002, the market rallied, carrying many mutual-fund sectors upward. As money moved slowly back into equities, scores of funds posted gains. Within stocks, value and real estate funds did well, up roughly 8 percent each; but natural-resources funds did best of all, up some 11 percent. Small-cap funds sailed. Growth, technology, and telecommunications funds lagged behind the market.

On the international front, precious metals and emerging markets led the pack. Asia (excluding Japan) and Latin America looked strong. Among taxable bond funds, emerging-market funds were way out front, while high-yield (junk) bonds saw some positive returns.

The overall climate for additional gains in the market is looking good, says Mr. Kaufman of Standard & Poor's.

"Our economists believe that domestic growth [GDP] in the first quarter came in between 5 and 6 percent," he says. "The second quarter looks like there will be growth of 4 percent to 5 percent, with growth coming in at 3 to 4 percent in the rest of the year.

"On balance," Kaufman adds, "you have to go with how markets traditionally respond coming out of a recession. Typically, they show solid improvement," a pattern that he believes is now under way.

Even the turmoil in the Mideast, unless events spiral totally out of control, should not derail the recovery, he says. "Oil prices would have to hit $50 to $70 a barrel" for the economy to really sink back into recession, he reckons, although some economists see the economy slowing if prices hit $30 a barrel.

Kaufman, for his part, believes that Western nations would not allow skyrocketing oil prices – as caused by an embargo – to sink global recovery. In fact, they might intervene to take over selected overseas oilfields, he says.

The three equity areas considered most promising by S&P economists are:

• Technology – mainly semiconductor equipment companies and large-cap firms such as AOL Time Warner.

• Consumer-cyclical firms, such as the auto industry, retailers, and the housing sector.

• Consumer-staple firms, such as food and beverage companies.

Still, most analysts believe that investors should use caution in buying into the market, including mutual funds.

"Returns will be decent" rather than exceptional, says Russ Kinnel, who heads up equity research for Morningstar Inc. in Chicago.

"If the main rule in real estate is location, location, location, then the main rule in investing is diversification, diversification, diversification," says Jeff Tjornehoj, a research analyst for Lipper Inc., in Denver. "Investors should be prepared to invest in just about everything."

Mr. Tjornehoj likes short- and intermediate-term bond funds, which he views as less volatile than long-term bonds funds, as well as both value and growth stocks. "Value stocks have done well this past quarter, but value is not going to stay on top forever. One of these days growth will be dominant again," he says.