Rick Ryder, chief investment officer, global fixed income at BlackRock, speaks during the Reuters Investment Summit in New York, November 7, 2019.
Lucas Jackson | Reuters
NEW YORK – When the bond chief is the world’s largest Asset manager Looking at the United States now, he sees a lot to like.
A combination of resilient government spending, business and consumer spending, improving home construction data, $1.5 trillion in excess savings, and low unemployment are telling BlackRock’s Rick Reeder that the US economy is doing better than many expected.
“I think the US economy is in a much better shape than people are giving it credit for,” Reeder said Tuesday at a party at BlackRock’s New York headquarters.
“There is a thesis that you will have a significant deceleration,” he said. “When you break down the numbers, it’s not clear.”
Talk of an imminent recession is growing as the impact of the Federal Reserve’s rate hike ripples through the economy. The collapse of three medium-sized banks this year has raised fears that lenders will curb access to credit, further slowing the economy. However, employment numbers confounded expectations, most recently for April, when non-farm payrolls jumped by 253,000.
“When people talk about, ‘We’re going into a recession or a deep recession,’ it’s unusual [or] “It’s almost impossible when you have an unemployment rate of 3.4%,” said Reeder.
Lots of cash was sidelined
Reeder, a three-decade veteran of markets who oversees $2.4 trillion in assets, said he expects the Fed to halt interest rate increases at its next meeting. While the central bank could raise interest rates again after that, he said his rate hike campaign was largely done.
That forecast, along with slowing inflation, gives investors a good backdrop, Reeder said, even if he expects the economy to slow later this year.
The biggest threat to Reeder’s thesis is the potential for the US to default on its sovereign debt, which could lead to panic and “potentially catastrophic” for the economy, according to experts including c. B. Morgan Chase CEO Jamie Dimon. Treasury Secretary Janet Yellen said that the United States may lose its ability to pay its bills as soon as June 1.
Reeder said he places a “very high probability” for the Biden administration to cut a deal with Republican lawmakers.
“I’ve never seen so much cash, so much of it” pending debt ceiling settlement before being deployed, he said.