Maintaining Market Optimism for 2014: Levkovich

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Oct. 15 (Bloomberg) -- Tobias Levkovich, chief U.S. equity strategist at Citigroup, discusses his market optimism for 2014, the state of global markets, the role of the consumer in the U.S. economy and the uncertainty of the government shutdown and debt ceiling limit. He speaks on Bloomberg Television’s “Bloomberg Surveillance.”

With the shutdown discussion.

Not only is he talking about the impact on sales, but it may impact october new vehicle sales by as much as 10%. it's the bright spot in the economy.

Keep bright spots like auto sales are threatened here.

Do you agree with the ceo of hyundai?

S is that he is right.

You see industrial orders also take a hit as corporate leaders say that we can see how this plays out heard all this means is that some of the industrial data which are not getting as a result of the shutdown will probably stay week here in the midterm.

Wall street will generally look past this and say is a nonrecurring item and gets recovered a little bit on the road.

In the interim it just gives you another reason to be cautious very there's this idea it is really hard to quantify confidence on the consumer.

We are bills on a consumer economy.

What we are and we are not.

I'll show to push back on that notion.

70% of gdp's consumer, but 56% is the components outside of healthcare.

Half of that is government spending.

If you take that 56% number which is real consumption on cars and appliances and things like that, that is comparable to 55% of the other countries.

The u.s. is not crazy despite the views of -- on a get past the distraction of washington right now.

Frame for us the equity markets in the next year.

Your been optimistic, do you maintain that optimism?

I maintain that optimism for 2014. we are on target for the s&p forecast for next year.

We are kind of there and i think -- reloaded ahead of ourselves, but this is critical.

How do you respond to the gloom, also worry, how do you respond to that?

Look at equities premiums per the coming off 30 year highs.

They're still level.

They're not at the absolute highs today.

Investors, while they talk about investing are not fully loaded.

Let me give an example.

We did the survey.

The cash position as a percent of assets, up from four percent a year ago to five percent.

Are people going to the equity markets?

It showed -- a chart yesterday showed euro up.

Do share that optimism?

Am concerned about people who are excited about europe.

That is exciting for europe because there been in decline.

What do you tell your parents about their 401(k) with all these distractions?

The foreign markets have really been beaten down two years ago.

Everyone is gung ho on developed.

Users are covering, europe is getting better.

It's not about europe or the u.s., is probably about emerging markets versus developed markets.

We like the u.s., we just think there's a better opportunities in the emerging markets.

You want to talk about the rest of the world right now but it looks pretty good compared to what is happening to the u.s.. we have to get back to this idea of washington and the shutdown of what is going to do to united states.

He is the ceo of hyundai.

I think you will appreciate this on the impact of confidence.

Typically correlate well with consumer confidence in general.

There is no question with the anxiety that comes with this sort of economic news and the issues around the debt ceiling.

We are definitely seeing folks sitting on the sidelines more.

Showroom traffic is down for the industry this month compared to september.

Is nice to get a real-world view of someone who's out there seeing what is happening in the showrooms, seeing the impact, the psychological impact on the u.s. consumer.

Not to mention the fact that he says he couldn't come at a worse time as a chief executive for an automaker who are working on the budgets for next year.

How do they make plans for capital investing and hiring amid all this?

Fortunately i don't have to do this.

But i think it is tough.

I will push back on the consumer confidence issue.

From a long-term perspective, we are still at fairly low levels.

We have loaned to the 2000 seven levels.

But despite the fact that we are well below, people may say i'm terribly non-confident and i think i'm going to do some all therapy.

Retail therapy.

Where the banks and all this?

Are you enthusiastic about the financials?

Would you like the financials.

We have to be careful when you say banks.

When the citigroup,? i can't comment.

Can you be here?

Please come on.

I'm going to hide under something.

I don't want the fcc knocking on my door.

The concept of the financials, we like diversified financials which includes the money centers as easily called her when we talk banks, the s&p banks or regional banks which are little bit different rate we are overweight reads which are double.

Everyone talks about the credit rates improving.

A lot is being driven by the release of users.

This can last forever.

No, part of the low reserves as part of the customer base.

Ultimately you need loan activity.

One of the things we watch is the senior loan officer survey from the federal reserve early it has been improving for the past five or six quarters.

And you cap gloomy.

It is hard to be particularly gloomy except for some of the distractions from the government.

Would have us a company guidance.

Was the ceo say given the fact that we have no idea how this is going to shake out in washington.

I think they're going to struggle with it.

Earnings estimates themselves have come on -- have come down pretty sharply.

It is the fourth quarter and into next year where they're going to have to temper expectations.

I want you to explain to strategist 101 question number one: the economy is lousy, wider stocks go up?

Are probably three reasons.

Earnings have not been too strong -- earnings have been relatively strong, carpets have been doing a lot of the buyback activity and at the margin there is money coming into the market.

There seemed to hundred billion plus coming to equities us year after seeing an exit as last year.

Coming up tonight on see sui c-suite.

This text has been automatically generated. It may not be 100% accurate.

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