“For investors, 2002 should be better than 2001,” writes Alex Berenson in today’s New York Times.

“Of course, that prediction is not exactly going out on a limb. Despite a rally in the fall, the Standard & Poor’s 500-stock index ended 2001 down 13 percent, the second straight year the index fell more than 10 percent. The Nasdaq composite index, which includes many computer and biotechnology stocks, performed even more poorly, giving up 21.1 percent after a 39.3 percent loss in 2000.”

“So investors, like all Americans, can be forgiven for wanting to put 2001 behind them. And with the possibility of an economic recovery early this year, the outlook for stocks appears solid, at least for the next couple of months.”

“But analysts warn investors not to get too giddy. Although the economy and corporate profits will probably be growing again soon, the rate of growth may be lower than investors expect. As a result, stocks will rise only moderately this year, they say.”

” ‘It is a foregone conclusion, unless something comes totally off the radar screen, that there will be both an economic and a profit recovery before the end of the first half” of the year, said Charles Pradilla, the chief market strategist for SG Cowen. ‘But there may be some disappointment with the vigor of the recovery. We are not going to get the terrific profit rebound that we were expecting.’ Like many strategists, Mr. Pradilla forecasts that the S&P. 500 will end 2002 at around 1,250, a gain of 8.9 percent from its current level of 1,148.08.”

“The year just past offers reasons for both optimism and fear. The decline in the S.& P. 500 and the enormous losses suffered by many technology investors are proof that stocks can be dangerous, especially for investors who take on too much risk or use margin loans to increase their leverage.”

“But as they examine their year-end mutual fund and brokerage statements, shareholders might be wise to remember that 2001 could have been much worse. Over the last three months, the stock market has rewarded the optimists, including many small investors, who kept faith in the resiliency of the economy after Sept. 11.”

“Since their lows of late September, the Dow Jones industrial average and S.& P. 500 have both gained about 20 percent, while the Nasdaq composite index, which contains most big technology stocks, has risen 37 percent. Almost no one expected stocks to recover as quickly as they have, especially given the failure of Congress to pass a stimulus package to aid the economy. But it now appears as though the economy will pull itself out of recession no matter what Washington does.”