- Top strategists told CNBC the US economy is doing better than markets currently realize.
- Ed Yardani and Torsten Slok said there’s reason to hope the US can avoid a widely expected recession.
- The Fed is expected to cool the pace of interest rate hikes at its meeting this week as inflation slows.
Leading strategists are growing increasingly confident that the US will avoid a recession in 2023 as markets remain resilient while the Fed softens its hawkish monetary policy stance.
“There’s more and more evidence that the global economic outlook is a lot better than people had feared,” Yardeni Research’s Ed Yardeni told CNBC on Monday, citing Europe’s recovery as energy prices fall and the reopening of China’s economy from COVID-19 restrictions.
The Federal Reserve is expected to increase interest rates by 25 basis points at its two-day meeting starting Tuesday. That’s a pullback on previous hikes to the Federal Funds Rate of 50 and 75 basis points as it winds down its fight with inflation, which fell to its lowest rate in more than a year in December at 6.5%.
The US’s economy’s apparent ability to weather any storms initiated by rate rises is beginning to leave some analysts bullish that a widely expected recession can be avoided.
“It’s going to grow slowly, but I don’t think we’re gonna have a recession,” Yardani said about the US economy, adding he thought the country had already been in a recession of sorts for the past year. “It’s just been a rolling recession, hitting different industries, different sectors at different times.”
The market veteran added: “I don’t see a credit crunch causing a recession. And I think the market is basically looking at inflation continues to come down.”
Likewise Torsten Slok, Apollo Global Management chief economist, separately told CNBC’ that expectations of a continued comedown in inflation toward the Fed’s 2% target was good news for the US economy, which is already in relatively good health.
“I think that things are actually better than the market is appreciating at the moment,” he said. “The labour market in particular is very strong, and we have just not seen any signs of weakness.
“We are just really a few months away from the market beginning to say, well, this inflation risk that we weren’t so much about last year, it’s just no longer the significant risk that we thought it was,” Slok said.
The rosier sentiment aligns with a Monday report by the IMF which predicted the US would likely avoid a recession, as it upgraded global growth forecasts.