America Is in a Recession of Confidence: Kleintop

When we last spoke with Jeff Kleintop in late May, I characterized the optimistic Chief Market Strategist at LPL Financial as being “a zig in a world of zags” as he talked about upside in a market that was consumed with pessimism. Today, his counter-trend style splits the economy and the recovery in two.

“Economic data is not actually pointing to recession,” Kleintop says. “But if you look at sentiment indicators, they are weak; consumer and business sentiment is soft.”

On this front, Kleintop has a point.

“The actual data — things we count, actually produce – we’re still seeing some pretty solid numbers there,” he says, using July Durable Goods and Industrial Production reports as examples.

On the flip side, he says a sharp market sell-off following the much weaker then expected report from the Philadelphia Fed Survey released on August 18th, is a good example of the rift. Kleintop says investors mistakenly viewed the regional data as a measure of actual manufacturing production, when in fact it is about manufacturing sentiment.

Ultimately, Kleintop thinks the problem will solve itself. “Confidence will come around and connect to that data,” which he says are coming in a lot better and aren’t “even near recession territory.”


Kleintop’s recession worries don’t come in to play until next year. “I don’t see a negative GDP print in Q3 or Q4. Where we’re at risk of a negative print is somewhere in 2012, but the market is not focused on that today.”

As for the Fed and “Gentle Ben,” they could help the confidence crisis by giving some “more lip service.” But Kleintop has greater confidence that a strong back-to-school season and good jobs data out this Friday will do more to mend to minds of the weary.

Kleintop suggests investors be patient, wait it out, and let the perceived slowdown correct itself. I hate to say it, but I have my doubts that resolution of the power outage or the confidence rut is going to exceed my already low expectations.

Wednesday, August 31st, 2011 Uncategorized

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