Institutional investors and financial executives on Pensions & Investments' Editorial Advisory Panel are generally bullish on the economy in the second half of the year.
Some 58% said they believe the economy will grow robustly or moderately, while 38% said it will grow slowly.
They also believe health care reform, job creation and deficit reduction are the nation's top economic challenge over the coming years.
Other findings include:
Some 46% believe long-term interest rates will increase in the second half, while 37% said they will remain unchanged. Only 17% predict long-term rates will decline. The survey was conducted after the Federal Reserve's first increase in short-term rates but before the second.
Panelists expect second-half corporate profits to grow moderately (52%) or slowly (29%).
Responses were evenly divided on whether the Clinton administration's threatened economic sanctions against Japan would help open Japanese markets to U.S. exports. Fifty-nine percent said they were somewhat concerned that such sanctions could lead to a trade war.
About half predict the stock market will finish 1994 higher than current levels. Another 26% said the market will finish the year unchanged. Only 24% said the market will end the year lower. As noted above, the panelists were surveyed just prior to the most recent slide in the stock market.
Asked about what they see as the nation's most important economic problems, panelists offered a broad range of insights.
The most frequently mentioned responses dealt with health care reform, controlling the federal deficit and unemployment associated with the lack of skilled workers and corporate downsizings.
Panelist Dennis Wells, administrative manager of the International Brotherhood of Electrical Workers, Local No. 82 in Dayton, Ohio, said funding of national health care is the most important economic problem facing the United States.
Reached by telephone, Mr. Wells said medical costs and increased health care cost burdens by plan participants make health care reform necessary, although he doesn't endorse any of the reform proposals currently under consideration.
"(Rising medical costs) are one of the elements that affect the majority of American people. We run a health and welfare plan in addition to a pension plan, and we have watched medical costs go through the roof over the last five years," he said.
Like many, the Dayton IBEW has "had to reduce benefits at the same time we are increasing costs to our participants. And we are continually looking for ways to keep costs down. National health care reform is needed, but I'm not sure how we can afford or pay for it," he said.
Reform of the current medical service delivery system is needed in order to control costs. "I believe the quality of medical care is there, but we need to control costs," Mr. Wells said.
Fred Hay, a member of the profit-sharing committee at Austin Diagnostic Clinic, Austin, Texas, said the most important economic problem is "developing the nation's human resources to meet the needs of a global economy, both near term and long term."
In an interview, Mr. Hay said U.S. workers may be adept at certain labor-intensive jobs "but can't compete with developing countries in that type of work."
"We need to upgrade the way we teach people the kinds of skills they will need to exist in a world that is not going to compensate people for shoveling dirt or piece-work. We need to train people to be computer literate and develop new technologies. Our government and school systems haven't done a very good job of doing that."
Another said the most important economic problem is "training the thousands of workers whose skills have become technologically obsolete."
As one panelist put it, the major challenge facing the U.S. economy is "employment over the long term. We are not coming to grips with the effects of increasing productivity and its correlative unemployment. The economists (and of course, the politicians) are lying to themselves and to us about this problem. We are adhering to a 20th century paradigm of capitalism in an emerging 21st century environment. The consequences will be severe, economically and socially."
One panelist, who responded anonymously, said: "Until U.S. leaders resolve the matter (of health care), they will not deal with the deficit, which is really the most important economic problem facing the U.S. today."
Panelists also appeared to generally support a recent Financial Accounting Standards Board proposed statement requiring companies to reflect the value of options granted to senior executives in their financial statements on the basis of full disclosure.
The survey questionnaire was sent to 220 advisory panel members, including investment managers and pension executives, on March 15. Responses were received from 137, a 62% response rate. The deadline for responding was March 31.
