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Biden Optimistic About Economy as Wall Street Shifts Stance
Despite earlier warnings of an impending recession, President Biden is confident in declaring victory on the economy, and it appears that Wall Street is gradually acknowledging this positive outlook.
The leading economic indicators peaked in February 2022, and recession concerns emerged on Wall Street by mid-2022, even as the yield curve inverted. However, as the second quarter of 2023 comes to an end, with several Fed rate hikes already implemented, the long-anticipated recession has yet to materialize. The Atlanta Fed’s latest forecast indicates a solid 1.8% growth in GDP for the second quarter.
Leading economists, such as Neil Dutta from Renaissance Macro Research, are joining in on the optimistic sentiment. Dutta recently highlighted multiple factors contributing to the positive outlook for the U.S. economy, asserting that “the recession clock has been reset.” One encouraging sign is the remarkable performance of the housing sector, with new home sales showing a surge in May for the third consecutive month. As mortgage rates remain low, homeowners are holding off on selling their properties, resulting in limited supply and stimulating the demand for new homes. This trend has a substantial impact on the broader economy.
Dutta also noted other favorable factors, including falling consumer prices outpacing labor market income, an anticipated rebound in inventory investments driven by growing household consumption, and improved auto sales due to enhanced supply chains. He refuted bearish arguments by highlighting that this business cycle is primarily driven by income, not credit, and that while initial jobless claims have been elevated, continuing claims suggest that laid-off individuals can quickly secure new employment opportunities.
In response to concerns about commercial real estate, Dutta emphasized that office construction represents only a small portion of the sector, with structural investments accounting for just 3% of the overall economy. Additionally, federal stimulus initiatives like the CHIPs Act are attracting private investment and fostering a more positive commercial real estate environment.
President Biden, preparing to deliver his speech on “Bidenomics,” expressed confidence in the current state of the economy during a fundraising event. He described the economy as “strong now” and dismissed the likelihood of a forthcoming recession.