The worst is over for the U.S. economy and for the stock market, says Barton Biggs, once chief investment strategist at Morgan Stanley and now managing partner of a $1.7 billion hedge fund.

Biggs' Traxis Partners, although down 4 percent year to date, racked up a 25 percent increase in last year's tough economy.

"Conventional wisdom is that the market will test its lows and go lower again," Biggs told the Wall Street Journal in a recent interview.

"I'm nervous, but my intuition tells me that after this consolidation is over, the next move will be up, not down," said Biggs, who anticipates a recovery sooner than do many leading analysts.

This year's market will lack drama, Biggs believes, moving laterally across the S&P 500 in a trading range between 1,250 and 1,550.

Once some of the major problems now afflicting the economy are remedied, which should occur in the near term, according to Biggs, the market will start climbing.

To top it off — no recession, says Biggs.

As for bears like George Soros, among others, Biggs thinks they're just wrong.

Biggs was among the first major analysts to predict the bursting of the tech stock bubble in 1999, while at Morgan Stanley. When his forecast materialized a few months later, he had helped his clients dodge the downside.

But he's been wrong, too, notably when he predicted the floor would drop out beneath $49 a barrel crude in May, 2004. Oil prices instead ran away to the upside.

"Psychology is involved here," he says of the market's current mood. "I like the fact that the market is worried."

Although the market has often nervously bounced up and down by 200 points or more lately, Biggs says we've had a classic bear market rally, with levels up 50 percent from their January losses.

Biggs sees more bullish signs ahead.

"If the Federal Reserve has made its last rate cut, that's bullish," he said. All indications point to an increase in the key rate when the Fed next convenes.

"We are close to the bottom in terms of new-home sales and construction," Biggs observed. "That's a definite plus for the economy."

Money has also been accumulating — "a huge amount of liquidity on the sidelines" — and investors and institutions are looking for appropriate places to put it, according to Biggs.

Equities are also now a good buy, Biggs believes. "U.S. stocks are the cheapest major asset in the world ... Will you get rich owning these stocks? No. Will you get richer? Yes."

Oil, as usual in recent years, is the joker in the deck.

"If oil goes to $175 in the next two or three months, all bets are off," said Biggs.

"This would be a hard blow to the U.S. and global economies. [It] would be inflationary and very recessionary. Oil rules the U.S. and world stock markets."