Associated Press
- Blackstone’s billionaire boss said the risk of a US recession has fallen, fears of a downturn are “overblown,” and the American economy will be “fine,” according to Financial News.
- “The consumer economy in the US is doing extremely well,” CEO Stephen Schwarzman told the news outlet. “We have the equivalent of full employment. We have very limited immigration and so the labor market is getting quite tight and wages are going up.”
- Blackstone’s chief investment strategist sang a different tune.
- Joseph Zidle, flagged the “mother of all bubbles” and other warning signs of an approaching recession.
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Blackstone’s billionaire boss said the risk of a US recession has fallen, fears of a downturn are “overblown,” and the American economy will be “fine,” according to Financial News.
CEO Stephen Schwarzman’s comments diverge sharply from the private-equity giant’s chief investment strategist, Joseph Zidle. Zidle has flagged the “mother of all bubbles” in sovereign debt and other warning signs of an approaching recession.
Schwarzman highlighted robust consumer spending, low unemployment, and rising wages as evidence of a resilient domestic economy, Financial News reported.
“The consumer economy in the US is doing extremely well,” Schwarzman told the news outlet. “We have the equivalent of full employment. We have very limited immigration and so the labor market is getting quite tight and wages are going up.”
Higher incomes are being matched by crushing healthcare bills, student loans, credit-card debt and other costs, forcing consumers to keep spending.
“For the first time since the financial crisis, wages are going up faster than inflation, so the average worker has more money in their pocket,” Schwarzman said. “The average worker is also under financial strain, so that money will go right into the economy, it won’t go into savings.”
The Trump administration has fueled growth as well, he told Financial News.
“It’s pretty clear that the current government has been good for the business community and for economic confidence,” Schwarzman said.
However, he warned growth could suffer “if consumers lose confidence” due to geopolitical factors such as the trade war.
But Zidle sees red flags
“I’ve turned more bearish on the current economic outlook,” said Zidle in an October 31 note. “I don’t expect a recession in six months, but I don’t think it will be as far out as two years from now, either.”
That’s from mid-2020 to about year-end 2021.
Zidle listed economic red flags that he fears may be connected.
“The failures in the repo market, negative-yielding debt, a deeply negative term premium, trade conflicts around the world, and a collapse in manufacturing all seem unrelated right now, but I don’t think they are random,” Zidle said.
