Jeffrey Klingelhofer, co-head of investments and managing director at Thornburg Investment Management, discusses the outlook for US and Chinese economies, and the implications for financial markets. He speaks with Paul Allen on “Bloomberg Daybreak: Australia.”
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US Recession Is Delayed, Not Canceled, Thornburg Says
As the US economy continues its impressive run, with record-breaking stock market levels and low unemployment rates, talk of a possible recession seems to have faded away. However, one expert warns that the recession is merely delayed, not canceled.
Larry Thornburg, CEO of Thornburg Investment Management, has analyzed the current economic landscape and believes that the signs of an eventual downturn are still present. Although the US has experienced an extended period of economic expansion, Thornburg believes this cannot last forever.
Thornburg points out that economic cycles are a normal part of any economy, and the current upswing is no exception. While policymakers and investors may breathe a sigh of relief, assuming the worst is behind us, Thornburg argues that complacency could be dangerous.
The signs that Thornburg cites as indicators of an eventual recession include overextended corporate earnings and valuations, mounting government debt, and sluggish global economic growth. These issues, if left unaddressed, can eventually lead to an economic slowdown.
One of the biggest concerns is corporate debt, which has risen to record levels in recent years. Many companies have taken advantage of low-interest rates and borrowed heavily, leading to a potential debt crisis. Once interest rates rise or economic conditions worsen, companies will struggle to service this debt, potentially leading to bankruptcies and job losses.
Another worry is the enormous US government debt, which has surpassed $26 trillion. While significant fiscal support has been crucial in responding to the ongoing COVID-19 pandemic, it has also contributed to a massive increase in public debt. At some point, this debt burden may become unsustainable, leading to potential ramifications for the broader economy.
Finally, the global economic landscape is a cause for concern. Europe, China, and other major economies have faced challenges and slowdowns even before the pandemic. Sluggish growth and trade barriers can have ripple effects, eventually impacting the US economy.
Thornburg’s message is not meant to instill panic, but rather to remind investors and policymakers to remain vigilant. Ignoring these warning signs could lead to a more severe downturn when it eventually arrives.
To avoid a painful recession, Thornburg suggests taking proactive steps. Policymakers should focus on reducing government debt and implementing measures that promote sustainable economic growth. Companies should also be cautious about overextending themselves and maintain healthy financial positions.
Furthermore, investors should assess their risk exposure and diversify their portfolios to withstand potential economic shocks. Instead of chasing high-risk investments that may falter during a recession, a balanced approach can help weather the storm.
In conclusion, the US recession might be delayed, but it is essential not to dismiss the underlying risks. Larry Thornburg’s warning serves as a reminder that economic cycles are inevitable, and it is crucial to remain prepared. Taking proactive steps now can help soften the blow and potentially mitigate the impacts of an eventual downturn.
Your mom is a recession.
Complete idiots
wrong fool
yes, because elections has to complete..
Yes if China is slowing, it will have a ripple effect on the global economy. If a country sneezes, the world will catch a cold.
There won’t be a recession. There’s way too much demand for goods and services. Just a silly thing the media keeps talking about
The economic data is based on the view of the financial markets. This market was supposed to be a conduit/platform for demand and supply. Never to inform or be a recession indicator but we have adopted that to be the case. The markets merely show a pos or neg concerning the producers and investors. As long as the economy has a farmer that makes bread, milk and meat available without being halted by drought/famine/war/weather then there's no recession but a downward move of the financial markets. Policy must employ the old economics and not finance as we know it now. Overvaluations cause inflation, Tesla is supposed to be $163 before split it's now double ($800 – $1500) before the split. US is killing the world because they don't understand economics. Block Wallstreet from giving liquidity to IPO's because that's the extra notes printed because nobody gave them money, but they are now billionaires without a day's work done in these companies. Making things more expensive for farmers to produce and manufacture, without all things in between like logistics and labor. This is the driving force behind the evil of Socialism. Then it's running to the mountains.
Bingo, it ain't just China, folks. Entire world printed trillions of dollars to hand out on top of new 2019 economic cycle highs. Largest asset bubble in the history of humanity. A recession is an absolute necessity. Unfortunately, anyone who bought after 2020 is going to be under extreme duress as prices fall 50% on homes and used vehicles. For the people saying, "there are too many people waiting on the sidelines for that to happen", well let's just see what 10-12% unemployment throughout 2026 does to that equation.
LOL
yes like 5 years. This is as valid as saying it will rain this year. They got red handed when they predicted a recession this year and shorted the stock market.
What goes up must come down.
Wages growth and rental growth is too high.
It will come down sooner or later.
It's never "cancelled". If you average all of the times of recessions it comes to 6 years, so there will always be one on the horizon. People are always bad at predicting them… there is always somebody saying there will be one.. so whenever they happen – that particular group who was saying one would happen at that particular time – take credit, when in reality a broken clock is right twice a day.
Good arguments, but I hear them all 50 times a day. Everyone saying same things over and over
Problem is everyone's just sitting on cash waiting for a dip… even the slightest dip, hedge funds buy… I'm sticking to my DCA for now.
Better to invest in precious metals, all EMs are facing some types uncertainties. It will be like this for next 6 months.
China absolutely uninvestable.
you’ve been saying this for years. give it up already.
People tend to forget the past.
From January 2007 to August 2007, the stock market had a bull market rally just before the big free fall of September 2007.
If you look at the past economic cycles, each time the central banks have done rapid increases of the interest rate (near zero to 5.25% in 2023), this resulted in a recession.
There is a 6 to 9-month lag, between the rises in interest rates and their effects on the economy. In the next months, these interest rates increase with be hitting the economy one after the other.
A magic 8 ball is probably more accurate than market analyst and economist.
Why does everybody think that we are in for a higher inflationary environment? Granted, it might take until Spring next year to be below 2%. But given enough time, with rates restrictive, an aging population, and Artificial Intelligence being implemented across the economy, we should have very low inflation over the next decade.
it's time to sell stock don't wait for a recession to come
John 6:37 All that the Father giveth me shall come to me; and him that cometh to me I will in no wise cast out.
To say it concisely: one day there will be a recession. Have a nice day.
Lol. I parked my cash in CD for the next 5-7 months. Looking fwd for the recession to come and see index tank 20-30%. Love this opportunity!!!
No Recession in the AI and EV Sector as Personal and Business Demand keeps Growing..* SOUN.. SoundHound AI Up 11 % last week…* PSNY.. Polestar…* RIVN Rivian…* NVDA.. Nividia…* VEV.. Vicinity Motors..* XOS Trucks…* HYZN.. Hyzon, more.
We're already in a depression… far beyond a "recession"