The ISM Services Index, a measure of economic activity, came out yesterday at 52 compared to the market’s expectation of 49.  In general, a number above 50 indicates an expanding economy and a number below that, a contracting one.  This economic data point is mildly encouraging, suggesting along with other economic indicators, a reduced risk of recession.

On the earnings front, most of the reports are largely behind us, although there are still a few heavyweights this week, including Cisco and Disney tonight.  As of yesterday, first quarter earnings estimates for the S&P 500 declined a full percentage point, implying negative 15.1% growth year over year.  Excluding financials, S&P 500 earnings growth would be up 10% year over year.  This, along with recent unemployment, ISM and GDP data, paint a picture of an economy that has its issues, but is nevertheless muddling on through.    

Ed Hyman, chief economist and founder of ISI Group, has been a Lone Wolf for much of the past six months, consistently sticking to his view that the economy isn’t in a recession.  Ed has been Institutional Investor’s #1 ranked economist for 28 years, a position he’s earned by being correct far more often than he and his team have been wrong.  While it may still be too early to call, it looks like the Lone Wolf may earn yet another bone.

But just because he’s less bearish on a recession, Ed also isn’t wildly bullish about an economic recovery.  In his no recession, no recovery view, his models are predicting GDP growth of just 1% for 2009.  For growth investors, this is a perfect environment as slower economic growth tends to benefit those companies whose success is less tied to the economic cycle and more dependent on product or process innovation.

Needless to say, I hope the Lone Wolf is right.  

And I’ll bet he will be.