President Bush took issue yesterday with the economic gloom and doom brigade, predicting America would escape a recession. Taking note of the recently enacted $168 million fiscal stimulus package, the president told a press conference: “I don’t think we’re headed to a recession, but no question we’re in a slowdown.”

Some high-profile figures don’t share his enthusiasm, among them a former Federal Reserve chief, Alan Greenspan, who has repeatedly bombarded the financial community with his assertion that there’s easily a 50% chance of a recession.

Another dissenter is veteran investment adviser Richard Russell, editor of the 50-year-old Dow Theory Letters of La Jolla, Calif. Claiming a recession is already under way, he points to an indicator that has been 100% accurate in forecasting severe market downturns. Since the early 1950s, there have been eight recessions, each preceded by a monthly year-over-year rise in unemployment of at least 13%. That indicator was triggered in December, when the jobless rolls rose to 7.65 million, a 13.2% increase from the 6.76 million unemployed in December 2006.

To Mr. Russell, the recession signal is undeniable. “Were in one or we’re going into one,” he says.

Mr. Bush does have some supporters. Heavyweight investment strategist William Knapp echoes the president’s thinking, arguing that widespread fears of a recession have been grossly overdone. His economic scenario: “No recession!”

Mr. Knapp, who guides investment strategy at MainStay Investments, a $37 billion money management subsidiary of New York Life, offers what he believes is a credible case to support his contention that a recession — generally viewed as two consecutive quarters of negative growth in gross domestic product — will not occur. His reasoning:

• The benefits of the fiscal stimulus package, which will kick off in May with rebate checks.

• The consumer remains resilient, as evidenced by better than expected January retail sales.

• Trade is going gang-busters and should offset any drag from housing.

• Export demand and a rekindling of domestic investment spending should help pep up the second half.

• When America is in a recession, new claims for unemployment exceed 400,000; they’re now running about 350,000.

• A bottom is in sight in housing, reflected in relatively low mortgage rates, which should go even lower because of further interest rate cuts, depressed prices, and pent-up demand.

Mr. Knapp expects new housing permits to turn positive late in the third or fourth quarter. He also figures housing would stop being a drag on GDP in the fourth quarter and become additive in the second and third quarters of 2009.

His GDP outlook calls for an upward revision in fourth-quarter growth to 0.8% from 0.6%, as indicated by inventory and trade data. He expects sluggish growth in the first half of the year, with the first quarter rising 1% or less and the second quarter up about 1.5%. For the full year, spurred by a pickup in the second-half — which is widely expected — he projects GDP growth of between 1.5% and 2%.

Turning to Wall Street, Mr. Knapp notes that estimates call for 2008 earnings growth of 15%, but he thinks a 5% to 10% gain is a more realistic expectation, which is the same kind of increase he sees this year for the S&P 500.

Like most market watchers, Mr. Knapp sees a 50-basis-point cut in short-term rates, to 2.5%, at the March 18 meeting of the Federal Open Market Committee. But unlike many of them, he doesn’t expect a similar reduction at the follow-up Fed meeting on April 29-30, citing continued strength in food and commodity prices, especially with oil at about $100 a barrel.

Mr. Knapp envisions only a 25-basis-point cut at the April meeting and a similar boost at the June 24-25 meeting. That would bring short-term rates down to 2%, at which point Mr. Knapp expects the Fed to hit the brakes because of its mandate to control inflation. The wheels of the economy “would have to fall off to go below 2%,” he says.

Turning to Wall Street, Mr. Knapp offers these words of advice to the hordes of stock market worry-warts: “It’s too late to sell because the market has already discounted most of the bad news, including a recession, and it looks cheap now.”

He rates consumer staples, health care, and technology as the most attractive stock sectors, with a tilt toward larger growth companies. He thinks the market’s most worrisome area, financials (banks, brokerages, and insurers), is also inviting. “You have to go back to the 1991 savings and loan crisis to see when these stocks were so cheap,” he says.

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