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Wells Fargo Senior Economist Mark Vitner and Moody’s Chief Economist John Lonski on the outlook of the U.S. economy and impact of Europe’s economi...
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I told you would -- agreed that US bank earnings hit a five year high as jobless claims and housing show little bit of improvement here there.
Does this mean we are on our way to a recovery let's have a street -- We got a street -- -- here we got a ball his name is mark bent Erik Wells Fargo managing director and chief economist.
And our -- is John Lonsky is Moody's capital markets research managing director and chief economist John I'll go first do you.
Now even Germany's Germany which isn't supposed to be the one country Europe is doing okay they're manufacturing index is in contraction.
Territory or are we going to see a recession it even drags Germany and.
It's quite possible that could be the case especially -- a we continue to have.
Government bond yields in Spain and Italy move higher you know today for the entire eurozone we had.
A preliminary look after composite PMI index of eurozone wide economic activity.
And that sank to a reading just under what -- six that definitely indicates a recession worse yet.
This particular index under -- It's.
Most pronounced decline since September and October of 2008.
And that was not the best of times for the world economy.
Well that's true but mark -- very optimistic and you -- don't necessarily tune out John staff certainly the like that but -- -- -- totally different opinion on where the economy is -- where we might be going.
What is behind your theory that we're looking a lot better.
Well I would say that we're very optimistic we are a bit more optimistic I think the bull bear spread is probably a little in error today than it's been for some time.
At what we see that Europe is going to go into recession but up most of the weaknesses in the southern countries it's not bad in Germany and France.
And when you look at where the majority of US exports go they mainly -- to Northern Europe so.
So I I think that yes you're gonna have a recession it should be manageable.
There will be some impact on our account even at but I don't think it's going to do do any serious damage to us.
John isn't it conceivable say is that we have of massive change.
In November as a result of the elections we'll get people letter much more committed to the private sector than you have now -- you have.
The situation in Germany perhaps not being as bad as it is how is it possible that.
That markets are tremendously undervalued right now in the US at least.
Well it's conceivable.
But that's still a big if -- -- whether or not the November elections are gonna come out.
In a manner that's favorable -- judge John Julie Jensen well we -- stimulate job -- -- should we just sit on our cash until then and wait until November is that what you're saying there's so much uncertainty so much risk.
Out there you've got you're up you have the November elections you -- signs of slower growth.
In dynamic emerging market countries like China and Brazil and on top of this got to worry about the fiscal -- this is no time to would assume more risk.
-- invest there or business mark take can't odd that you obviously feel differently about that.
Well I don't know that you can sit back I think when you think about the economy seldom are all the stars aligned perfectly we always have challenges out there.
As far as the fiscal cliff goes yeah it's real big if all of that was going to happen so clusters and never happen congress is that gonna go through with the sequester.
The -- security payroll tax would probably be extended the bush era tax cuts -- -- pushed out past the election.
Or at least partially extended -- I don't think all of this bad stock's gonna happen.
We're not wide eyed optimist on the -- we have 2% GDP growth penciled in for this year.
And maybe a hair under that next you're like one point eight that's certainly not great.
But that I I I really think there's a lot more going right in the US look at what's happening -- energy.
Look at what's happening in the mobile Internet look at the -- what's happening in health care and there's a lot of new technologies that are driving a lot of good things in the country.
It certainly feel a lot better about the outlook three -- former years down the road than we do today.
But but climbing up -- -- this wall of worry.
It doesn't do you any good if this were about the things you can't control John is there any particular sector that you think is more immune -- to the problems either overseas or here than any other sector what sector looks best in Europe.
Both health care you others who.
That's gonna continue to grow in part because of an -- US population.
And it's the aging of the US population -- -- next ten years those between the ages of sixteen and 65 years of age.
Are gonna grow by half a percent annually those above 65 growing by 3.2 percent annually by the way.
If -- work force is growing bite only what half of 1% on average that's gonna make it nearly impossible.
For long term economic growth to approach it's nearly 3.4 percent.
Rate that was common in the years after World War II while you both agreed on one thing that health care might be the place to invest let's do this again guys thank you so much.
Thank you appreciate.
