The US economy is slowing, but the country might avoid a recession if it doesn’t escalate its trade battles with China, Europe and other nations.
The trade truce between the Trump administration and China is one reason why the stock market recently reached record highs. Now investors are hoping that a full-blown trade war can be avoided.
Krishna Memani, vice chairman of investments for Invesco, told CNN’s Julia Chatterley last week that President Donald Trump needs a trade deal with China so that the US economy does not slow down precipitously before the 2020 election.
He also said that the Federal Reserve will probably cut rates at least twice this year in order to forestall a recession.
The biggest risk to the economy is a trade war, Memani wrote in a recent blog post for Invesco, adding that “recessions are the result of failed policy.”
In that May blog post, Memani cited concerns at the time about whether the White House would launch more tariffs against Mexico, adding that such a decision would “raise the prospect of a recession in the not-too-distant future” and hurt the US auto industry. Trump wound up calling off those tariffs in early June.
Memani added in another post that the US economy doesn’t have to fall into a recession just because some economists think we’re due for one. This is the longest expansion on record. Memani said this expansion could last another five years.
The Fed is still the market’s friend
Memani has also said that investor concerns about whether lower rates would weaken the US dollar may be overblown.
“While it is true that Trump has been talking about the Fed, lower rates and even dollar strength, what he truly wants is US growth, which he will get in the second half of 2019,” Memani wrote in another recent blog post. “The need to support growth with dollar intervention will subside over the next few quarters naturally.”
