- Barings CEO and Chairman Tom Finke says he doesn’t see any sign of a recession in the next year or two, which would help stocks build on their big gains from the past few months.
- The $338 billion firm’s Global Markets Chief Michael Freno said inflation is the biggest threat to the market today, but it doesn’t look like an immediate concern.
- In the meantime, Freno says strong consumer spending and low unemployment should keep the US economy growing for the foreseeable future.
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DAVOS, Switzerland — It’s hard to blame investors for being mistrustful of the peace that’s descended on the stock market lately — but it might be for real.
As chaotic as the world might feel in 2020, it’s getting harder to see what might knock the global economy off course as central banks commit to lower interest rates and easier monetary policy, the US-China trade war cools off, and growth looks steady. That means the late-2019 rally could keep going.
That’s the view of Barings Chairman and CEO Tom Finke, and Head of Global Markets Michael Freno, who both say a US recession looks very unlikely in the near future even though the current economic expansion is almost 11 years old.
“We don’t see a recession, pushing out 12, 24 months,” Finke told Business Insider in an exclusive joint interview. “If it does (happen) we believe it will be a shallower type of recession than what we’ve seen in the past, in part because you do have a put from the Fed.”
Freno concurs. While trade tensions and the threat of tariffs might never go away — creating uncertainty that makes CEOs hesitant to spend money — he says there’s no reason to think a big downturn is coming.
Asked about big risks that could shake up this placid picture, both men zeroed in on inflation.
“One thing … that could create a problem is if you saw a sudden increase in inflation, globally or domestically, which forced central banks to raise interest rates,” Freno said.
Higher interest rates slow economic growth by discouraging lending and spending, and rising rates often prompt investors to worry about recessions. But today, the Barings duo says the US economy still looks very solid.
“The consumer is doing well,” said Freno. “Unemployment is low, wages are starting to increase, although not by much, savings rates are actually elevated, so everything is working for the consumer, and in the US, that is the large majority of the economy.”
As for rising inflation, it’s been hard to find any sign of it in the last decade. Finke says the evolution of the economy is partly to blame because it’s eliminating costs for businesses, removing some inflation pressure.
“Businesses are changing,” he said. “The Amazon effect in retail is probably the best example. This era of the new economy is different in that sense, and I think technology and the adoption of technology has to have an effect on inflation.”