It has been pounded into our heads from our earliest days doing fire drills in elementary school; In the event of an emergency, walk quietly -- do not run -- to the nearest exit.
So with stocks extending their pre-summer swoon by shedding more than 5 percent in five weeks, many are bracing for the worst and pushing others aside to get to the exits. Raymond James' Chief Investment Strategist Jeff Saut is not one of them.
"I just don't see that [a crash] happening right now" Saut says, adding that he sees any correction "limited to seven to 10 percent".
How can that be?
Saut points first to continued strength of corporate profits and the fact that, historically, strong earnings almost always lead to hiring. Secondly, he cites the improvement in the credit markets and an easing of credit standards. And finally -- and most bluntly -- he says, "I think the economy is in a self-sustaining recovery." All this despite our recent string of economic indicators not only disappointing but trending downward.
Saut says this soft patch was created by a very early Easter holiday observance, a rash of really bad weather, and the belated global repercussions of the Japanese earthquake and tsunami. GDP estimates have already started to fall for the second quarter, yet Saut doesn't flinch as he sticks with his 3 percent growth forecast and belief that "the economy will retool and re-gear itself".
And for the record, if you are counting on more QE3 following in the footsteps of QE 1 and 2, guess again because Saut says "there's not going to be one." Again because, in his view, the recovery is self-sustaining.
But what if the economic bears have it right, and this actually does spiral into a nastier slowdown?
"If it does look like we are going into another recession, I am very confident that the powers that be will indeed institute quantitative easing 3." However, "I think President Obama and Fed Chairman Bernanke are both very cognizant of trying to foster a better economy, and that's another reason why I think the economy is self-sustaining and will be that way over the next year or so."
So there you have it. The economy is going through a soft patch. It's not as bad as many people fear and IF for some reason it does get ugly, good old Uncle Sam is not just going to sit on the sidelines and watch that happen.
Forget what you think, buy what you know.
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- Raymond James