My Money Engine

Steve Leuthold, whose Leuthold Global Fund (GLBLX) beat 92 percent of its rivals in the past year, said political uncertainty has pushed U.S. stocks into a bear market even as the economy may still be growing.

“We are in a bear market,” Minneapolis-based Leuthold said today in an interview with Betty Liu on “In the Loop” on Bloomberg Television. “I am not so sure that it is an economic bear market -- we actually may have a couple more quarters of expansion here.”

Benchmark indexes had their biggest slump since December 2008 yesterday on concern that a downgrade of the U.S. credit rating by Standard & Poor’s may threaten the economic recovery. The S&P 500 slipped 11 percent in three days, the most since November 2008, and fell to the lowest since September as European leaders struggled to contain the region’s debt crisis. The S&P 500 dropped 18 percent from this year’s high on April 29 through yesterday.

Leuthold said it was “the perfect storm,” in which “confidence went out the window both with institutions and individuals -- and when there is no confidence, there are no buyers.”

The investor said he has 45 percent of his asset-allocation fund holdings in equities and may cut that to 35 percent if the market rallies. The S&P 500 gained 2 percent to 1,141.95 at 1:38 p.m. in New York, the biggest intraday advance since Sept. 1.

“We wish we were at 35 percent, but the market came down too fast and we didn’t have a chance to do that,” he said.

Leuthold, who bet on stocks before the S&P 500 reached a 12-year low in March 2009, estimated that the gauge may fall to 950 to 1,000, about 10 percent to 15 percent below yesterday’s close.

“When you see the market get down to the bottom quartile of historical valuations, at that point we generally would get aggressive and say it has to get better from here,” he said. “That’s a long way away. We got a good rally before then, I’m sure. In fact, maybe this is the beginning of it.”

By Nikolaj Gammeltoft and Betty Liu - Aug 9, 2011 2:01 PM ET

# posted by BIOENGINE @ 6:01 AM