- The U.S. economy looks healthy based on underlying fundamentals.
- It’s a tale of two economies: strong domestic demand but weaker industrial activity.
- Federal Reserve rate cuts should provide a tailwind for stocks.
- A brewing trade war with China remains the biggest wild card.
The past few weeks have seen a fundamentally changed investment environment in the U.S.. Since July 31, the Federal Reserve has cut interest rates for the first time in a decade, the U.S.-China trade dispute has intensified and market volatility has returned with a vengeance.
Against this backdrop, Capital Group economists Darrell Spence and Jared Franz have revisited their outlook for the U.S. economy, including the prospects for a near-term recession. In the following Q&A, they offer their thoughts on the Fed’s dramatic policy shift, the potential impact of new tariffs on China, and what it could mean for investors.
How have these events influenced your assessment of the U.S. economy?
Darrell Spence: In many ways, the U.S. economy still looks fundamentally healthy. GDP growth is averaging above 2% on an annualised basis. Retail sales are solid. Wages are rising in excess of inflation. Job growth is strong and the unemployment rate is well below 4%. If we just look at the domestic data, the U.S. economy remains in good shape.