Tepid Expansion Keeps the Next Recession at Bay, Says Yardeni

The current US economic expansion, now the longest on record, has been called the most unloved in history. And therein lies its staying power, according to economist Ed Yardeni.

His point is that the expansion’s 10-year run, reached this month, has been so underwhelming that the speculation-driven froth and willy-nilly debt increases that usually accompany an ascent are missing here.

Yardeni, the president of Yardeni Research and a long-time Wall Street economist, has been saying for years that this growth spell will last through 2019 and likely beyond. As he wrote in a recent research note: “Our basic thesis has been ‘no boom, no bust.’”

“The Trauma of 2018 was extremely… traumatic,” he observed. “The widespread fear that it could happen again anytime soon has kept a lid on speculative excesses. So there hasn’t been a boom to set the stage for a bust.”

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And how. The current expansion, while the longest, has been the weakest postwar recovery, the National Bureau of Economic Research finds. The run’s average annual growth rate is a mere 2.3%

And any surges turn out to be temporary. In this year’s first quarter, the rate was 3.1%, which was down from the 4% pace seen in 2018’s second period, likely fueled by the federal tax cut. A survey of economists from The Wall Street Journal finds meh projections ahead, with 2.1% in the second quarter. The average estimates for the third and fourth periods this year and next year’s first are uninspiring: 1.7%, 1.4%, and 1.2%.

Worries abound these days, chiefly on the China-America trade war front, where there’s some optimism over renewed talks although progress has been fitful. Still, consumer spending remains brisk, up 3.7% yearly, and unemployment is at a near-decade low of 3.7%. Plus, employers added a better-than-expected 224,000 jobs in June, an improvement over May’s disappointing results. At the same time, surveys of industrial activity have shown declines.

With nerves still jittery from the financial crisis and Great Recession during the last decade, recession prognostications have been rife for some time. And in Yardeni’s view, as perverse as this may sound, that very pessimism has blocked the advent of another downturn.

To Yardeni, “the next recession has been the most widely anticipated of all time. That might explain why it hasn’t happened so far.”

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Tags: economic expansion, recession, Trade War, Unemployment, Yardeni

Lorrie Tingle

Lorrie Tingle has retired after more than two decades as chief investment officer of the Mississippi Public Employees’ Retirement System, the organization confirmed.

Tingle exited the fund on June 30 after 23 years, Shelley Powers, its communications director, told CIO in an email. Tingle oversaw the investments department since June 1, 1996, according to the $28.3 billion pension fund’s executive page. Her former spot comes up as “vacant,” meaning she had no successor in place.

Deputy CIO Andrew T. Hoeniges will be the interim investment head until Tingle’s replacement is found.

“We look forward to working with him in this capacity,” Executive Director Ray Higgins said. “Together with our investment consultants, we’ll continue to monitor/manage our portfolio with a focus on continuity during the transition.”

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Higgins said the search and other “long-term staffing needs” will be addressed eventually, as Mississippi PERS’s current focus is “continuity and transition.”

The fund is also looking for an internal auditor, according to the executive staff page. It recently promoted Dr. Brian Rutledge, University of Mississippi Medical Center chief of staff, from vice chair to chair of its board of trustees. Chris Howard, executive director of the Mississippi Department of Rehabilitation Services, will succeed him.

The retirement system added $75 million to the Westbrook Real Estate Fund XI, according to Pensions and Investments.

The plan’s allocations as of March 31 were 32.42% international equity, 26.43% domestic equity, 20.09% fixed income, 10.33% real estate, 7.96% private equity, and 2.77% in cash and cash equivalents, according to board minutes from its April meeting.

Tags: Lorrie Tingle, Mississippi, Mississippi Public Employees’ Retirement System (PERS), Pension, Retirement