Ralph Schlosstein, chairman emeritus at Evercore, discusses the chance of the US dodging a Recession, the risks of Federal Reserve policy, uncertainty on the US economy, and his view of M&A activity. He speaks on “The Pulse With Francine Lacqua.”
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Evercore’s Schlosstein on US Recession and Economic Uncertainty

Amidst ongoing concerns about the state of the US economy, Ralph Schlosstein, the CEO of Evercore, a leading global investment banking advisory firm, recently shared his insights on the possibility of a US recession and the overall economic uncertainty.

Schlosstein acknowledged that the US economy has experienced an unprecedented expansion since the 2008 financial crisis, with continuous growth for more than a decade. However, he highlighted several factors that investors and economists need to consider when assessing the risk of a possible recession.

One of the key factors Schlosstein pointed out is the unpredictability surrounding geopolitical events, such as the US-China trade war and Brexit. These events have created significant uncertainty in global markets and have the potential to impact the US economy. The trade dispute between the world’s two largest economies, in particular, has already had a noticeable effect on business sentiment and investment decisions.

Schlosstein also emphasized the importance of the high levels of corporate debt in the United States. Over the past years, companies have taken advantage of low interest rates to borrow extensively, leading to a significant increase in debt levels. This situation could potentially become problematic if interest rates rise or if companies face difficulties in servicing their debts, which could exacerbate the impact of an economic downturn.

Additionally, Schlosstein called attention to the inverted yield curve, a phenomenon where long-term interest rates fall below short-term rates, which has historically been an indicator of an upcoming recession. While he recognized that the yield curve is not a foolproof predictor, as it has flashed false signals in the past, he emphasized that it is a critical indicator to monitor closely.

Despite these concerns, Schlosstein remained cautiously optimistic about the US economy. He highlighted the resilience of American consumers, who continue to drive economic growth, supported by solid employment and rising wages. Furthermore, he stressed that the Federal Reserve has been proactive in monitoring the economic indicators and implementing measures to support the expansion, such as lowering interest rates.

As for Evercore’s strategy in navigating this uncertain economic environment, Schlosstein reinforced the importance of maintaining a strong focus on long-term investments and providing clients with sound advice and guidance. Additionally, the firm continues to invest in talent and technology capabilities to better serve its clients and adapt to changing market conditions.

In conclusion, Ralph Schlosstein of Evercore highlighted the potential risks that could lead to a US recession, including geopolitical uncertainties, corporate debt levels, and the inverted yield curve. Nonetheless, he emphasized that the American economy remains resilient, and, with proactive measures from the Federal Reserve, a recession might be avoided. Evercore, for its part, remains committed to guiding clients through these uncertain times and positioning itself for long-term success in the evolving economic landscape.