Anthony Crescenzi, a strategist at Pacific Investment Management, said that the Fed's efforts to curb rampant inflation by raising interest rates could lead to a recession in the United States, but the economy is strong enough to recover faster.
"what kind of recession will this be? You will start to see the view that [the recession] may not be too severe, "said the Pimco market strategist and portfolio manager. "the idea that this is a hurricane may be wrong. Maybe the right idea is light rain, which may be more stable, because in a recession, the fiscal and monetary authorities are unable to do much. "
Wall Street seems to have become a weather station since Jamie Dimon, chief executive of JPMorgan Chase, predicted a hurricane in early June. Dimon stuck to his forecast when discussing the company's results on Thursday, but pointed out that healthy U. S. consumption could dispel the dark clouds.
Crescenzi agrees that consumers will be crucial to the resilience of the U. S. economy.
U. S. stocks rose on Friday after data showed that long-term consumer inflation expectations fell to an one-year low in early June. In addition, retail sales grew faster than expected, although adjusted for inflation, growth remained stagnant.
"of course, we could fall into a recession. But it may be mild, "Crescenzi said. "when the recession comes, the economy has the ability to improve. When it comes to household balance sheets, you should have heard that savings exceed the long-term trend line by $2.5 trillion. Household net worth reached $150 trillion, an increase of $50 trillion from five years ago. Because of the recent fall in the stock market, you can lose $10 trillion, but it's still pretty good. In addition, the banking system is also very strong. "
Edit / isaac