Gallagher said he is encouraged by the consumer confidence and housing numbers from this morning and sees more room for confidence to improve before year-end.
“I’m more encouraged that the consumer will be kicking in meaningfully by the end of the year and into 2010,” he said.
“August is going to be almost off the chart for auto sales. We’re seeing the spending coming from consumers on autos and also housing—two big ticket items. So I think there is a lot of room for surprises.”
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In the meantime, Loest said investors should not depend on consumers to return to the markets—because they won’t.
“The consumer has been debt-fueled for the last 20 years, especially the last 15 years—and that’s gone. I don’t think that’s coming back in 2010 or 2015,” he said. “Taxes will be higher, consumers will be saving more, they’re paying down debt.”
Investors wanting to make money in this market are better off focusing on the areas of the economy that are rebalancing, said Loest.
“There’s a shift in the economy and I think when the consumer hit 72 percent of GDP or higher, that was an overbalanced economy and that was fueled by debt. That’s not going to come back,” he said.
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“What we’ll see is a gradual rebalancing of the U.S. economy to a consumer component of maybe 60 to 65 percent over the next few years and a larger government and industrial.”
Loest expects the industrials, government and health care stocks to rise.
“If you’re invested in those sectors, it may not be great news, but it will be better news than if you are trying to make money on the same old consumer spending stocks that we’ve been money-on for the last half-century.”
No immediate information was available for Gallagher or Loest.
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