A slowing economy and weaker inflation should give the Federal Reserve room to cut short-term interest rates by early fall, predicted economist Jeff Thredgold at Vectra Bank’s annual economic-forecast breakfast Thursday.
But Thredgold and Lincoln Anderson, chief investment officer with Linsco/Private Ledger, told Denver audiences Thursday they don’t see a recession on the horizon.
“My recession concerns are about as close as you can get to zero this year,” said Anderson, addressing clients of Brown & Tedstrom, a Denver-based financial-planning firm.
In his forecast, Thredgold was a little more cautious, placing the odds of a recession this year at around one in five.
By contrast, U.S. Bank regional economist Tucker Hart Adams since September has been calling for a 75 percent chance that a recession will start this year, driven by a housing contraction that is causing overstretched consumers to curtail spending.
Housing market
Existing-home sales dropped 8 percent last year, the first annual decline since 1989, while median-price gains were flat for the year, according to a report Thursday from the National Association of Realtors.
Any Fed easing would bring 30-year, fixed-rate mortgages back down to the high 5 percent range versus the 6.4 percent range of recent months, Thredgold said.
Many parts of the nation did suffer a housing bubble that is now contracting, but not Colorado, he said.
In coastal areas, existing- home values doubled in the past five years, while Colorado home prices rose about 25 percent, Thredgold said, citing tallies from the Office of Federal Housing Enterprise Oversight.
“I want to be a buyer of real estate in this market and a seller of real estate in the other markets,” he said.
On the corporate side, Anderson said he sees no signs that typically precede a recession, such as reckless corporate investment, shrinking earnings or spikes in wages paid.
Stock markets
Stock markets should rise at about the pace of earnings growth, Anderson said. But he cautioned that the returns on international and value stocks, which have outperformed in recent years, may lag domestic growth stocks.
Thredgold last January correctly predicted that the Dow Jones industrial average would break 12,000, not exactly a consensus pick at the time.
Given the strength in the global economy, which has had its best four-year growth spurt in three decades, Thredgold sees more room for equities to rise this year.
“I remain very optimistic about the stock market,” he said.
Anderson and Thredgold predict that the fourth-quarter gross-domestic-product report, when it comes out at the end of the month, will show more strength in the economy than expected.
Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.
