By GREG EDWARDS
TIMES-DISPATCH STAFF WRITER
• Local stocks have a mixed year (link to article on InRich.com)

After besting major U.S. stock indexes early in the year, the Richmond Index trailed the field when 2007 was said and done, posting a 4.51 percent loss.

Weighing down the local basket of stocks were the same sectors that performed poorly across the economy as a whole -- consumer-goods and financial-services companies. Those are two sectors in which the Richmond region has a large presence.

Without a major turnaround in the troubled housing market, the first part of 2008 could produce more of the same for stocks associated with the consumer-goods and financial sectors. Some local experts, however, believe the strength in other sectors will keep the economy out of a recession this year.

The region's worst performer in 2007 was Henrico County-based Circuit City Stores Inc., whose stock price finished the year 77.87 percent below where it started.

Additionally, Genworth Financial Inc.; Carmax Inc.; Tredegar Corp.; UDR Inc.; Media General Inc., publisher of the Richmond Times-Dispatch; LandAmerica Financial Corp.; and Chesapeake Corp. saw their stock prices fall more than 25 percent during 2007.

The index's leader was Massey Energy Co. of Richmond, one of the nation's leading coal producers, whose stock price gained 53.9 percent for the year. The gain reflected an overall rise in energy prices.

Owens & Minor, a Hanover-based medical-supply company, was the region's second best performer with a 35.69 percent gain. The company benefited from the acquisition of the McKesson Corp. acute-care distribution business.

The Richmond Index's loss for the year compares with a 6.43 percent gain for the Dow Jones Industrial Index, a 3.53 percent gain in the Standard & Poor's 500 Index and a 9.81 percent increase in the Nasdaq Composite Index.

The year-end results were sharply worse than the first three months of 2007, which ended with Richmond-region stocks outperforming major national indexes by about 3 percentage points or more.

"The first half [of 2007] started off well, and then the subprime meltdown hit and the market has been moving sideways ever since," said Steve Marascia, an analyst with Anderson & Strudwick in Richmond. He was referring to the high-risk mortgage market, whose collapse has snowballed to chill credit markets worldwide.

Will the credit problems affect the U.S. and world economies in 2008? That will depend on consumer behavior and other factors, and it's too soon to tell, Marascia said.

Added Brian T. Ford, a certified financial planner with RBC Dain Rauscher: "It's our view that we're not necessarily headed toward a recession."

The U.S. markets did not do as well as the Chinese stock market, which finished the year with a 100 percent gain. However, the fact the U.S. markets are ending the year in positive territory is impressive, given oil and gold prices, continued Middle East tension and the decline in the dollar's value, Ford said.

Excluding the consumer and financial sectors, the U.S. markets did quite well, Ford said. Although economic and job growth may have slowed, Ford doesn't believe the economy is headed toward a recession, which is defined as two consecutive negative quarters for the gross domestic product.

Ford is not ready to recommend that investors put their money on the banking sector, though.

"It's pretty clear that housing and banking still have some problems to sort out," he said.

Going forward, Ford said he will be keeping watch on job growth, corporate earnings and business inventory levels to gauge the health of the economy.

"It's been a volatile year and not just in most investment markets," said Russell E. Lundeberg Jr., chief investment officer at Chesterfield County-based Barrett Capital Management. Roiled by a host of major issues, people's perceptions of the economy passed through a series of changes in 2007, he noted.

"It's an unusual time when you see so many intelligent people have such varied opinions [on the economy's direction]," Lundeberg said. "A lot of that push and pull created more volatility."

While the credit meltdown has hurt, the economy started the year with a lot of strength and still holds a lot of strength, he said.

Contact Greg Edwards at (804) 649-6390 or gedwards@timesdispatch.com.