Financial institution of America’s CEO has one easy cause why he doesn’t see a recession looming

Moynihan says the ‘U.S. shopper continues to spend and that can preserve the U.S. economic system in good condition.’

Financial institution of America Corp.’s CEO Brian Moynihan says he doesn’t see a recession within the offing as a result of the U.S. shopper stays wholesome.

The Wall Avenue chieftain’s feedback, which aired on CNBC on Wednesday, come as traders have been fretting concerning the well being of the U.S. economic system with the Trump administration has been locked in a yearlong battle with China over commerce coverage.

The dispute, centered on import duties, has raised the possibilities {that a} recession might grip the home economic system quickly, elevating anxieties in monetary markets. Nonetheless, Moynihan mentioned {that a} yield-curve inversion, which occurred briefly final Wednesday between the carefully watched yields for the shorter-dated and longer-dated authorities bonds, doesn’t essentially signify {that a} recession is imminent.

The U.S. 2-year Treasury notice yield TMUBMUSD02Y, -0.53% briefly traded above the 10-year Treasury notice yield TMUBMUSD10Y, +0.16% for the primary time in over a decade (and it occurred briefly on Wednesday), a situation that has preceded the final seven recessions.

“Look, when the yield curve moved across the pundit-ocracy received going, saying, ‘Right here, this implies a recessions coming,’” Moynihan instructed CNBC.

Nonetheless, the financial institution boss mentioned this time the recessionary gauge could also be influenced by a worldwide market swirling in some $15 trillion in damaging rates of interest.

“However should you really give it some thought, there could possibly be two causes that the yield curve is transferring round and also you’re seeing that debate take maintain,” he mentioned.

“Which partially is the flight to high quality. 80 – 90% of all of the yield on the planet is obtainable in the USA. So, the cash comes flying right here since you’re gonna give your cash to somebody — a thousand {dollars} — they usually provide you with again much less in 10 years ? Otherwise you’re gonna give your cash to somebody — a thousand {dollars} — they usually provide you with again extra in 10 years?. And so, that’s why there’s an amazing debate about that,” the Financial institution of America CEO mentioned.

Moynihan mentioned the talk concerning the U.S. economic system’s trajectory comes all the way down to the patron.

“And so in our buyer base by this time Aug. 15 yr so far, you’ve seen the quantity spent by American shoppers at Financial institution of America: $2 trillion,” he mentioned.

“It’s up 5.9% from final yr by the identical time frame. So, in [2017-18] you’re up about 8.5% and 2018-19 up 5.9%. So, take into consideration that as $120 billion extra spending by our shoppers this yr versus final yr, which suggests the U.S. shopper continues to spend and that can preserve the U.S. economic system in good condition,” Moynihan defined.

In response to the Bureau of Financial Evaluation, shopper spending makes up 68% of the U.S. financial exercise.

Moynihan’s sanguine view of the patron additionally comes because the Dow Jones Industrial Common DJIA, +0.93%, the S&P 500 index SPX, +0.82% and the Nasdaq Composite COMP, +0.90% have been having fun with a brisk run-up on Wednesday at the very least partly on the again of upbeat earnings from retailers Goal Corp. TGT, +20.43% and Lowe’s Cos. LOW, +10.35%, seen as an extra indication of the well being of shoppers.