Improved market conditions are predicted for 2002 in the year-end edition of The Outlook, Standard & Poor’s flagship investment advisory newsletter.

The optimism stems, in part, from predictions by Standard & Poor’s chief economist, David Wyss, that the recession will end in January or February. The market, on average, has begun to rise four months before the end of the last nine postwar recessions.

“Down markets don’t last very long,” says Arnold Kaufman, editor of The Outlook. “In the past 60 years, the S&P 500 has never fallen three years in a row. In addition to 2000-2001, only 1973-1974 saw back to back declines, and that was followed by two years of double-digit gains.”

S&P believes that the liquidity to fuel renewed economic expansion is high after a year of aggressive monetary easing by the Fed. It points out also that American household reserves are substantial, with individuals holding a record $4 trillion-plus in money market funds and savings deposits.

Mitigating this optimistic picture are high stock valuations and earnings restraints, especially for big-cap technology and telecommunications services, the weekly newsletter says. Recovery in technology will lag behind the rest of the economy, making overall profit improvement next year modest. Even so, Standard & Poor’s internal Investment Policy Committee forecasts that the S&P 500 will reach 1255 by mid-2002 and 1315 by the end of 2002. Similar gains are predicted for Nasdaq.