Recover password

U.S. economy doing better than most think

cfaALBUQUERQUE, N.M. — Jay Kloepfer helps craft investment strategies for large institutional investors such as pension funds, insurance companies, endowments and others with long time horizons, which is why the market hysteria and fads of any particular moment mean little to him.

And from emerging markets to labor markets, things are not going that badly, no matter what the latest market gyration might suggest, he said.

“I think we’re doing better than we thought we would a year ago,” the San Francisco-based executive vice president of Callan Associates Inc. told the Journal last week before speaking at the CFA Society’s annual forecast dinner in Albuquerque.

The recession that began in December 2007 was complicated by the financial panic that followed the next September, he said. “We’ve had other panics. We forget them.” Recovery usually occurs five years after a panic. “That would be now,” Kloepfer said.

Market downturns attributed to slowing growth in emerging markets and political turmoil in Washington are just manifestations of fear, not anything meaningful happening in the economy, he said.

Emerging markets, for example, have fallen on word that China’s growth rate has slipped from 7 percent to 5 percent, even though 5 percent is a decent rate of growth, he said. Other markets, like Brazil and India, “are still potential sources of incredible growth. People are just scared all at once.” Emerging market volatility will weed out investors with less tolerance for risk, he said.


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The domestic economy has been producing around 180,000 jobs a month for the past two years, which isn’t great, but it isn’t bad either, Kloepfer said. He expects the Federal Reserve to respond to signs of weakness in the jobs data with some monetary relief, despite a commitment to slow down asset purchases and shrink its own balance sheet.

“Underlying all of these issues is the housing market,” Kloepfer said. The asset managers he talks to are waiting for housing “to get on a firm footing. That’s what it takes for the economy to take off.”

Housing remains weak, first, because many local markets were over-built and, second, because some younger people who in years past would be thinking of forming a household and buying their first homes are waiting on the sideline.

“They have no confidence in buying a house, and they’re not,” Kloepfer said. The data show that 30-year-olds “are the most conservative investors in the world.”