Bank of America Corp. CEO Brian Moynihan says he does not see a recession because the US consumer remains healthy.
'But what's going to make it happen is the underlying American consumer. And the underlying consumer is doing well and making more money, they are hired; and more importantly, they spend more money. & # 39;
The comments on the Wall Street chief, which aired on CNBC Wednesday, come after investors have violated the health of the US economy with the Trump administration locked in a year-long battle with China over trade policy.
dispute, centered on import duties, has increased the chances that a recession may soon take hold of the domestic economy and raise concerns in the financial markets. However, Moynihan said an inversion in the yield curve, which happened on Wednesday between the closely monitored rates for the shorter-dated and longer-dated government bonds, does not necessarily indicate that a recession is imminent.
The US 2-year government bond yield
TMUBMUSD02Y, + 2.15%
traded short of the 10-year government bond yield
TMUBMUSD10Y, + 0.60%
for the first time in over a decade, a condition that has preceded the last seven recessions.
"See, as the yield curve moved around the pundit ocracy, saying, & # 39; Here, this means a downturn is coming, & # 39; Moynihan told CNBC.
However, this time the bank manager said that the recession could be affected by a global market swirling around $ 15 trillion in negative interest rates.
Check out : After the yield curve inverses – here is how the stock market has tended to operate since 1978
“But if you actually think about it, there can be two reasons why the yield curve is moving and see that the debate is taking hold, he said.
“Which in part is the aircraft of quality. 80 – 90% of all returns in the world are available in the United States. So the money comes flying here because you're going to give your money to someone – a thousand dollars – and they give you less in ten years? Or you want to give your money to someone – a thousand dollars – and they give you more in ten years? And that's why there's a big debate about it, "said Bank of America CEO.
Moynihan said that the debate about the course of the US economy is coming down to the consumer.
"And so in our customer base through this time on August 15 to date, you have seen the amount spent by US consumers on Bank of America: $ 2 trillion," he said.
"That's up 5.9% from last year over the same time period. So, in [2017-18] you're up 8.5% and 2018-19 up 5.9%. So think of it as $ 120 billion more consumption of our consumers this year versus last year, which means the US consumer continues to spend, and it will keep the US economy in good shape, "Moynihan explained.
According to the Bureau of Economic Analysis, consumer spending accounts for 68% of US economic activity.
Moynihan's poignant view of the consumer also comes as the Dow Jones Industrial Average
DJIA, + 1.04% ,
The S&P 500 Index
SPX, + 0.84%
and Nasdaq Composite
COMP, + 0.90%
enjoyed a quick run-up Wednesday at least in part based on the positive revenue from retailers Target Corp.
TGT, + 19.54%
and Lowe & # 39; s Cos.
LAV, + 10.03% ,
seen as a further indication of consumer health.
Watch the nearly 14-minute CNBC interview below: