DBS CEO: US market outlook confusing

Mixed economic data from the U.S. paints a confusing picture, suggesting the recovery may be much slower than what markets are pricing in, said Piyush Gupta, CEO of DBS Group, Southeast Asia's largest bank.

"For the first time in a long time, I'm actually quite confused about the U.S. market," Gupta said at an event for clients of DBS' private bank. "The data points coming out of the U.S. are very, very mixed. It's quite unclear where the market is headed."

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Gupta believes the low volatility levels in the market, with the CBOE Volatility Index, or Vix, trading at pre-crisis lows, also indicates widespread uncertainty over the outlook.

Piyush Gupta, chief executive officer of DBS Group
Pete Marovich | Bloomberg | Getty Images
Piyush Gupta, chief executive officer of DBS Group

"Volatility comes from people having diverging views," he said. "In the absence of views, the market is inactive and therefore it's quite clear there's neither direction nor activity."

The U.S. gross domestic product (GDP) data for the first quarter is a key part of Gupta's expectation the pace of economic recovery may disappoint. Last week, data showed the U.S. economy contracted by 2.9 percent in the first quarter, much more than initially estimated and the worst performance for five years.

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"The U.S. GDP number will be lucky to come in at 1.6-1.8 percent this year," compared with a consensus forecast for around 3 percent at the end of last year, he said. DBS has cut its growth expectation to a below consensus 1.6 percent, with 2014 likely to mark the third year running that forecasts for GDP growth of more than 2.5 percent will be disappointed, he said.

"Each of the last two years, the final GDP numbers came in below 2 percent. So for three consecutive years, the sense of optimism about GDP growth has been totally misplaced," he said. "Everybody says the U.S. is growing very strongly and the rest of the economies are growing very strongly, but somehow it seems to me the data doesn't seem to bear this out."

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To be sure, he noted that May new housing data showed a huge 19 percent jump, while non-farm payrolls data is showing a "not bad" around 200,000 jobs being created a month, but he added, "consumption drives GDP and I'm not seeing the consumption number go up."

He believes the yield on the U.S. 10-year Treasury is signaling that the market isn't as confident of the economic recovery as consensus forecasts would suggest.

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"The U.S. economy long term is not going to see a high inflation, sustained growth economy," he said.

With the U.S. 10-year Treasury yield trending around 2.5 percent, down from around 3.0 percent in January, "what that's telling you is increasingly the markets are also beginning into take into account this possibility that the recovery will be far more protracted and will take much longer for rates to start going up," Gupta said.

"If that is the case, we're in for a much longer ride to recovery than most people are pricing in," he said.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1