Kleintop conceded that overall, employment numbers looked solid, even in weak economies like Spain’s are showing some impressive job numbers, fueling optimism and consumer confidence.
But Kleintop poked holes in the belief that strong consumer confidence can translate to continued economic growth.
“Consumer confidence is high and that worries me,” he said. “I like it when it is low and rising, not when it is high and starting to dall. I worry that it’s vulnerable to any kind of pull abck in the the job market. We’ve got to watch that very closely.”
Also, the labor market is a lagging indicator, explained Kleintop. Amid drops in trade and manufacturing, employment numbers may be “the next shoe to drop,” and with them could come consumer confidence.
Beyond 2019, the near-term trajectory of the economy may depend on the ability of leaders in the U.S. and its major trade partners, China in particular, to hammer out a trade agreement, and a successful resolution to Brexit.
“Will we see a spillover into jobs before we get a trade deal? We’ll be watching the data very closely: This risk is high,” he said, adding that the U.S.’s ability to reach agreements with Japan and South Korea and positive progress on a trade agreement with Mexico and Canada give some reason for optimism.
As for those inverting yield curves?
Kleintop said that in addition to being a common harbinger of recession, a yield curve inversion also predicts a cyclical change in equity market between growth and value. After outperforming value stocks for most of the bull market, growth is more likely to underperform moving forward.
“Over the next cycle, value stocks are the place to be – until the next yield curve inversion,” he said. “Over the last few moths we’ve started to see value outperform. It’s portrayed in the financial media as a blip, but I think it’s for real.”