The US economy is in a slowdown, not a recession: Strategist

markets finishing the day mix with the Dow hitting its fifth consecutive session of gains here to help us break down all today's market action is Brian levit Global Market strategist at investco Brian it is good to see you and I want to start on on one topic Brian that's certainly getting a lot of attention with which is NVIDIA uh which is taking a breather here Brian and you know I think a lot of investors are just wondering you know can the market keep rallying Brian when you have a giant like Nvidia hitting the pause button here what do you think yeah I think the pause button's a reasonable word for that let's remember we've seen an unbelievable advance in that name I mean the irony is that when Nvidia was leading or a handful of names were leading people were boning that too wishing to see hoping to see it broadening out so if we do continue to see this broadening out in the market um that's actually a healthier environment that's a that's a better backdrop so um you know I I believe that if the if the Federal Reserve can successfully normalize the yield curve without you know any type of recession in the United States which isn't in doesn't appear to be in the cards that should be a good backdrop for risk assets even if um a couple of names at the top um which had moved substantially need to um cool off a little bit here I mean Brian that said there has been a little bit more noise being made by folks who watch the FED that the risks now are more weighted to them acting too late and that the risks of a potential recession are rising how worried are you about that well I'm not overly worried about the risk of recession I mean when I look at the indicators that would suggest to me if we're if we're having a recession I would expect to see corporate bonds spreads or yields relative to the risk-free rate blowing out Banks tightening lending standards significantly so we're not seeing that we're just seeing signs of slowdown in the real economic data um but I do agree that the risk is to growth not to inflation mean that story the inflation story is say at this point and so yeah I would like to see the Federal Reserve startes I believe that 525 to 550 fed funds range in a world where their preferred measure of inflation's at 275 well that's just too tight and it it's time to start uh bringing those rates down again I've told people before they don't answer my phone calls but I certainly expect to start seeing that um as we move towards the end of this year into next year and Brian what if they don't ease though would that change your view of the market and where we're headed in 2024 no I don't think that you know not certainly not in the near term um I think the Federal Reserve you know to me whether it's September or December is is largely immaterial it's more that the easing cycle is commencing now uh the the longer I suppose the longer they wait the the risk to the economy is larger but the good news is there's not a lot of Leverage and a lot of excess in this econ economy so even though we've been inverted now on the yield curve some 1920 months the economy has been able to be resilient through that again because it's not a classic cycle we don't have a lot of Leverage we don't have a lot of excess so I don't think that you know the FED whether they do it one month versus the other month is necessarily the the big risk um it's more that if they just misinterpret this environment and stay on hold you know indefinitely well economy slowing it could likely use a little bit of help here um besides the fed the other big thing that we are watching Washington related is of course the presidential election we've got a debate coming this week we are going to be hearing from the treasury secretary Janet Yellen here on Yahoo Finance in just a few and obviously there's a lot of sck economically in terms of Economic Policy what are you focusing on on that front when it comes to the election well one of the things I'm trying to do is Cal people's concerns about it um you know people tend to get very worried that something's going to happen in an election environment that is going to meaningfully change the economy or meaningfully disrupt markets that's not how it works if you go back in history you'll find that most election years the markets have done just fine volatility hasn't picked up significantly um and you've seen um you've seen the only time you've seen markets underperform is really in recessions 08 in and uh and and 2000s so beyond that the markets have done fine I mean what you want to hear now I mean I think they're both going to pursue a pretty America First agenda um I don't know if we're going to get a lot of details about that on the debate stage you'd want to get a better understanding of where tax rates are going to be um in a in a second bid Administration but I think the bigger message to investors is that it largely doesn't matter as much as they expected to um even if you look at the last two elections the performance from the days that Trump and Biden were elected in November 16 and November 20 uh the market performance of both through their first 900 and something days trading days in office is almost exactly the same so it sounds like Brian what you're telling clients when they're asking you is listen it's important but what you seem to be saying is it's important but it's one variable among many yeah it's certainly one variable among many and when I think about markets I mean it's always to me what's the direction of the economy and what's the Fed going to do and you know right now it's a global economy that's been fairly stable in Aggregate and the market you know with some broadening out seems to think that things are getting a bit better um around the world and you have the fed that's likely to ease so to me that is more informative than whether I had a crystal ball right now to tell you who wins the White House who's W who wins the Senate who wins the House of Representatives I'd far rather have Clarity around which part of the cycle we're in the next most likely direction of the economy and what the Federal Reserve is going to do Brian thank you so much for joining us appreciate it my pleasure thank you

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Length: 6min 13sec (373 seconds)

Published: Mon Jun 24 2024