The terrible start to the new year for stocks and oil and concerns about whether China's economic slowdown might sink the U.S. recovery have been overblown, Legg Mason Chairman and CEO Joe Sullivan said Wednesday.
Excluding the oil patch, "you don't get the sense we're going into a recession here. Restaurants are busy. Travel is busy. Everything feels anything but a recession, anything but negative," he told CNBC's "Squawk Box."
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Appearing on the show with Sullivan, Rebecca Patterson, chief investment officer at Bessemer Trust, agreed. She said that outside the Wall Street echo chamber, things look pretty good.
"The hit to the average American's wealth from the fall in equities we've seen ... is offset by the rise in their home values and the benefit they're getting from lower energy prices," she said. "The average American isn't feeling anything like what we feel emotionally watching this roller coaster."
There's evidence individual investors may be holding their ground, despite the correction in stocks.
Last week, Bank of America Chairman and CEO Brian Moynihan told "Squawk Box" in Davos: "The institutional world is moving around because that's what they do. But the general population hasn't really adjusted to this yet."
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Legg Mason's Sullivan said Wednesday he's seeing the same thing. "The retail investor, we've seen redemptions pick up a little bit, but not extraordinarily so."
"Our retail [investor] sales have actually held up a little bit, comparatively well. So that's encouraging. I think people [are] taking a longer view," he added.
Sullivan, whose investment firm makes money when people stay in the market, advised investors not to hold cash.
"If you sit in cash versus what you can get even out in the three- to five-year area of the [Treasury yield] curve, there is cost to waiting for investors," he argued.
Legg Mason's $670 billion in assets under management are allocated 53 percent in fixed income, 28 percent in stocks and 19 percent in liquid assets.
Sullivan's view contrasts with what Allianz Chief Economic Adviser Mohamed El-Erian told "Squawk Box" on Tuesday. El-Erian said investors should hold 20 to 25 percent of their portfolios in cash. "You need the optionality of that cash" during times of volatility.