“This is a consumption based economy,” Jack Ablin, the Chief Investment Officer at Cresset Capital Management told Yahoo Finance’s YFi AM. “Two-thirds of our growth is derived from household spending. The good news is the job market is great and households have money to spend. Oil prices are low, interest rates are low. All in all, we're pretty well set up for continued spending. You saw last quarter's GDP, and that was over 3% growth in household spending. While of course, the business side is kind of taking a breather and trying to wait and see what's going on, that's having some impact. But I don't think it's enough to offset the consumer growth we're seeing right now.”
Ablin’s comments echo optimism coming from the Trump administration. White House Economic Advisor Larry Kudlow told NBC’s Meet The Press on Sunday that he doesn’t see a recession on the horizon and that “despite a lot of worries with the a volatile stock market, most economists on Wall Street towards the end of the week have been marking up their forecasts for the third and fourth quarter.”
President Trump tweeted about the ongoing trade war this weekend stating that the U.S. is “doing very well with China and talking.” However, Bloomberg is reporting that President Trump told reporters on Sunday that he’s not quite ready to sign a trade deal.
We are doing very well with China, and talking!— Donald J. Trump (@realDonaldTrump) August 18, 2019
“I think obviously the White House was cognizant of the potential for impact of tariffs on consumers, particularly going into the Christmas selling season,” Ablin said. “I think the notion of backing that off made sense. Interestingly, it was a recognition perhaps by President Trump that consumers are paying these tariffs and not necessarily just China by itself. So they do want to keep that consumer going. They do want to keep households flush with cash. I do think that's enough to power us through a reasonable Christmas selling season 2019.”
However, this is not to say that the U.S. economy has the all-clear.
“My concern, however, is looking out over the next 12 months, where this 7%, 8%, 9% profit growth is going to come from if businesses really are just sitting around waiting for something to happen,” Ablan said. “I don't see a trade deal — a meaningful trade deal coming to the table before the election. And that's going to put a lot of pressure on President Trump and the rest of the White House.”
Chelsea Lombardo is a production assistant for Yahoo Finance. You can find more of her work here.