Reuters analysis finds stock leaders on bumpy economic road, no double-dip

NEW YORK, July 8 - Mid- and small-capitalization stocks often serve as a leading indicator for the direction of the U.S. economy. So what does it say that they are down roughly 15 to 20 percent? As the U.S. economy throws up dismal economic data, putting the ominous possibility of a double-dip recession at the top of Wall Street’s talking points, money managers are saying that assessment would be premature. “Right now the market is responding to this fear, and double-dip is in the air… but is it verified in the statistics? And in that case we are saying ‘No, there is no double-dip,’” said Milton Ezrati, senior economist and market strategist at Lord Abbett, in Jersey City, New Jersey. “Particularly in an environment like this it is very dangerous because the market picks up the talk and it will give a lot of false signals,” Ezrati said, referring to the influence grim economic data can have on stock markets and vice versa. Risks of a double-dip have increased, managers admit, as employment and housing have failed to rebound, and, akin to the eternal chicken vs. egg debate, corporate earnings estimates are being revised downward in anticipation of sluggish growth.