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What Recession?

Why the long face? Oh, you’ve been reading analysts’ reports of gloom and doom. Well if you enjoy that kind of reading, fine.

But why not put on your rose colored glasses, instead? That’s right. The economy’s sunny outlook could cause glare.

According to USA Today, an increasing number of economists expect Thursday’s GDP to confirm that we’re a long way from recession. And recent data seems to suggest they’re right. The latest ADP report says employers unexpectedly added jobs in July, and another set of numbers says housing starts remained high in June.

In the wake of all the sunny economic news, how should you trade ahead of Thursday’s GDP number? For insights we turned to JPMorgan Funds chief market strategist David Kelly.

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GDP READING: KELLY'S PREDICTIONS

Consensus: 2.3%
Kelly’s Estimate: 2.5%
Reaction: Stocks, Dollar Higher: Treasuries Lower
Biggest Mover: Financials

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Kelly estimates GDP will come in at 2.5% slightly above the consensus.

“If this is a recession, it’s a pretty wimpy recession, he says on Fast Money. “In the 10 recessions since WWII, every time we have had 2 negative quarters of GDP and this time around we haven't had one yet! So if there is a recession it's a wimpy recession.”

That seems to suggest we’ve overestimated the problems facing our economy.

“I don’t think we’ve overestimated the problems on Wall Street or the problems on Main Street because the poorest people in America are really suffering from energy prices,” Kelly replies.

“But if you look at the economy itself, the spending of middle Americans is still moving forward. I think the shape of the economy is in better condition than Wall Street seems to suggest.”

This wouldn’t be Fast Money without a trade. Kelly has an investment thesis.

“If you can deal with the volatility I’d be a little overweight stocks,” he says. “When we get into 2009 the stock market ought to go up.”


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Trader disclosure: On July 30, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (AAPL), (TSO); Najarian Owns (CSCO) Calls, (EMC) Calls, (XLY) Calls, (SU) Calls; Macke Owns (WMT), (MSFT), (COST), (ATVID), (DIS), (EMC); Adami Owns (C), (GS), (INTC), (NUE), (AGU), (MSFT), (BTU); Finerman Owns (GS); Finerman's Firm And Finerman Own (C) Leaps; Finerman's Firm Owns (FLS), (MO), (NOK), (PM), (RAI), (SUN), (TSO), (VLO), (RIG), (MCC); Finerman's Firm Is Short (SPG), (KIM), (XLF), (BBT), (IYR), (IWM), (MDY), (SPY), (IJR)

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