According to the bond chief of the world’s largest asset manager, there is much to like about the U.S. right now. Rieder says that government, corporate, and consumer spending, improving homebuilder data, $1.5 trillion in excess savings, and low unemployment indicate that the American economy is doing well. “I think the U.S. economy’s in much better shape than people give [it] credit” for, Rieder said Tuesday at an event at BlackRock’s New York headquarters. “There’s this thesis that you will have a dramatic slowdown,” he said. “When you break down the numbers, it’s just not apparent.” As the Federal Reserve’s interest rate increases ripple through the economy, talk of a looming recession has grown. This year, the collapse of three midsized banks has stoked concerns that lenders will restrict credit, further slowing the economy. Still, employment figures have confounded expectations, most recently in April, when nonfarm payrolls jumped by 253,000. “When people talk about, ‘We’re going to a recession or a deep recession,’ it’s pretty unusual [or] almost impossible when you have an unemployment rate of 3.4%,” Rieder said.
Rieder, who manages $2.4 trillion in assets, expects the Fed to pause rate increases at its next meeting. Despite the possibility of raising rates one more time, he said the rate-hiking campaign is largely over. That expectation, combined with slowing inflation, gives investors a good backdrop, even if he does expect the economy to slow later this year. The biggest threat to Rieder’s thesis is a potential U.S. default on its sovereign debt, which could usher in panic and be “potentially catastrophic” for the economy, according to experts, including JPMorgan Chase CEO Jamie Dimon. U.S. Treasury Secretary Janet Yellen warned that the country could have trouble paying its bills as early as June 1. Rieder puts a “very high probability” of the Biden administration striking a deal with Republican lawmakers, he said. “I’ve never seen so much money sitting in cash, and a lot of it” waiting for a debt ceiling resolution before being deployed, he said.