Cox thinks the recovery in housing is producing an economic multiplier effect, helping consumer confidence and contributing to demand for other goods and services. Aside from the negative effects of government cutbacks, the underlying economy is doing well, he said.
"I really believe that what is going on now in the real economy -- outside of government -- is quite strong," he said. "It is being covered up by all the negative attributes of government," namely sequestration, the automatic federal budget cuts that went into effect in the spring and have resulted in furloughs of federal employees and a reluctance to hire among private, federal government contractors.
- - -
Still, not everyone is confident that the Fed will be able to taper off its quantitative easing program, as Bernanke suggested, starting this fall through mid-2014.
Investors started 2013 with the sentiment that the economy was not strong enough to warrant the Fed ending its support program, but with confidence that moderate growth was sustainable, said Tim Jester, managing director at CapGroup Advisors in Henrico County.
"In other words, we were in somewhat of a sweet spot (of) modest growth without accelerating fast enough for the Fed to take away the punch bowl," he said.
But the Fed's recent announcements have shifted that sentiment, said Jester, who thinks the central bank will have to postpone its tapering of bond purchases "as growth disappoints."
"This is exacerbated by the weakness in Asia, particularly China," he said.
Investors also have bailed on bonds, sending the 10-year Treasury note yield to 2.64 percent, a more than a percentage point increase since early May.
"Bonds have been crushed," Jester said, adding that he expects continued high volatility in bond prices as interest rates normalize.
A. Marshall Acuff Jr.
While the economy is still recovering, A. Marshall Acuff Jr., managing director of Cary Street Partners in Richmond, also isn't convinced that economic growth this year will give much support for the Fed to phase down its stimulus this fall.
Acuff said he doesn't foresee "sustainable headway" in stocks until sometime in late October or November, but he remains modestly bullish on stocks for all of 2013.
Acuff is keeping an eye on business capital spending as an indicator of when things might really take off.
While automobile sales and housing are recovering now, "what the economy needs is a broader base of strength than those two areas, and the most logical area in my opinion would be capital investment," he said.
"I think that companies are in strong financial position to support increased capital spending, but because they lack the certainty and visibility of the future, they are holding back," he said.
- - -
The Richmond Index, created by Bloomberg News in 1994, includes companies in a diverse range of industries.
Eleven of the 17 stocks on the index showed gains for the quarter.
"Most of the (Richmond) stocks rallied through the first half of this year, up until about a week ago," said Marascia with Capitol Securities Management. "With the market decline, they pulled back, too."
Richmond-based Media General Inc. led the local gainers for the quarter and so far this year. The company, which owns 18 television stations, announced in June that it plans to merge with New Young Broadcasting Holding Co. of Nashville, Tenn., a privately held company that owns 12 television stations.
Henrico-based Star Scientific Inc., a former tobacco company turned maker of dietary supplements, was the biggest decliner for the quarter and the year.
The company, which until late 2012 sold tobacco products, disclosed in March that the federal government is investigating its securities transactions. The disclosure prompted several shareholder lawsuits.
(c)2013 Richmond Times-Dispatch (Richmond, Va.)
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