Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, speaks at a Reuters Investment Summit in New York, November 7, 2019.
lucas jackson | Reuters
NEW YORK – When the bond chief of the largest asset manager look at the United States right now, he sees a lot to like.
A combination of resilient government, business and consumer spending, improving homebuilder data, $1.5 trillion in excess savings and low unemployment tells BlackRock Rick Rieder that the US economy is doing better than expected.
“I think the US economy is in much better shape than people think,” Rieder said Tuesday during an event at BlackRock headquarters in New York.
“There’s this thesis that you’ll have a dramatic downturn,” he said. “When you break down the numbers, it’s just not apparent.”
Rumors of an impending recession are mounting as the impact of Federal Reserve interest rate hikes ripple through the economy. The collapse of three mid-sized banks this year has fueled concerns that lenders will curb access to credit, further slowing the economy. Still, the jobs numbers have baffled expectations, most recently for April, when nonfarm payrolls jumped 253,000.
“When people say, ‘We’re going into a recession or a deep recession,’ that’s quite unusual. [or] almost impossible with an unemployment rate of 3.4%,” Rieder said.
A lot of money set aside
Rieder, a three-decade veteran of the markets who oversees $2.4 trillion in assets, said he expects the Fed break rate increases at his next meeting. While the central bank could raise rates one more time after that, he said his rate hike campaign was largely over.
That expectation, combined with slowing inflation, gives investors a good backdrop, though he expects the economy to slow later this year, Rieder said.
The biggest threat to Rieder’s thesis is a potential U.S. default on its sovereign debt, which could cause panic and be “potentially catastrophic” for the economy, experts say, including JPMorgan Chase CEO Jamie Dimon. Treasury Secretary Janet Yellen said the United States could lose the ability to pay its bills as early as June 1.
Rieder puts a “very high probability” that the Biden administration will strike a deal with Republican lawmakers, he said.
“I’ve never seen so much cash in cash, and a lot of cash ‘waiting for a debt ceiling resolution before being deployed,’ he said.