Rick Rieder, BlackRock Chief Investment Officer Global Fixed Income, speaks at a Reuters investment summit in New York, November 7, 2019.
Lucas Jackson | Reuters
NEW YORK — Then the bond chief of the world’s largest asset manager looking at the US now, he sees a lot to love.
A combination of resilient government, corporate and consumer spending, improving homebuilder data, $1.5 trillion in excess savings and low unemployment tell BlackRock’s Rick Reider that the US economy is doing better than many expected.
“I think the US economy is in much better shape than people are giving it [it] credit,” Rieder said Tuesday at an event at BlackRock’s New York headquarters.
“There’s this proposition that you’re going to have a dramatic slowdown,” he said. “If you break down the numbers, it’s just not clear.”
There is increasing talk of an impending recession as the impact of the Federal Reserve’s rate hikes seeps through the economy. The collapse of three medium-sized banks this year has fueled concerns that lenders will curb access to credit, further slowing the economy. Still, the employment numbers have baffled expectations, most recently in April when nonfarm payrolls rose by 253,000.
“When people talk about, ‘We’re going into a recession or a deep recession,’ it’s quite unusual [or] almost impossible when you have an unemployment rate of 3.4%,” Rieder said.
A lot of money wasted
Rieder, a three-decade market veteran who oversees $2.4 trillion in assets, said he expects the Fed to the break percentage increases at the next meeting. It could raise rates one more time, but he suggested that the rate hike campaign is largely complete.
That expectation, coupled with declining inflation, gives investors a good starting point, even though he expects the economy to slow later this year.
The biggest threat to Rieder’s thesis is a potential US default on its national debt, which could usher in panic and be “potentially catastrophic” for the economy, according to experts including JPMorgan Chase CEO Jamie Dimon. Treasury Secretary Janet Yellen has said the US could lose its ability to pay its bills from June 1.
Rieder said the chances of the Biden administration striking a deal with Republican lawmakers are very high.
“I’ve never seen so much money sitting in cash, and a lot of it” waiting for a resolution on the debt ceiling before being deployed, he said.