The US economy is on "pause" because of the new administration, according to Blackrock's Larry Fink, and Trump's tax proposals are unlikely to spur enough economic growth (due to demographics), leaving America "on the path to exploding deficits."
Just a week after the CEO of the world's largest asset manager said that “the warning signs are getting darker" and pointed to slowing auto sales and corporate M&A activity as evidence that the underlying economy may not be as healthy as S&P returns would indicate.
"The U.S. economy is not growing as fast as people would have thought in the 4th quarter."
"So to assert that we're going to continue to grow at this size or higher...well, I never make forward predictions like that."
And today, Fink told an audience at the Morningstar Investment Conference in Chicago...
"We will have a severe issue if the reform increases deficits."
If the U.S. economy grows at 3 percent a year that may help push deficits down but "with our demographics it seems pretty improbable to see sustainable 3% growth," he said. Fink predicted growth of 2.5 percent to 2.75 percent.
"The whole world is going through a growth spurt. We are not, we are growing slower than France. That is pretty terrible."
Bloomberg reports that Fink added rather pointedly that, if immigration is reduced that would eliminate one of the "major engines of growth." Fink made his comments as the Commerce Department today reported that the economy expanded at the slowest pace in three years. Gross domestic product, the value of all goods and services produced, rose at a 0.7 percent annualized rate after advancing 2.1 percent in the prior quarter. Consumer spending, the biggest part of the economy, rose 0.3 percent, the worst performance since 2009. Even with the stock market at record highs, Mr. Fink said the U.S. is "decelerating."
As Fox Business reports, U.S. corporate executives are "pausing" to see how President Trump’s plans progress, Fink said. "What's being proposed by the administration is almost a bucket list of all types of things they’d like to see done," he said.
Finally, we remind readers of Fink's comedic (we hope) detour from last week, saying - in perfect circular manner - that the market is waiting for Q1 earnings to determine whether the recent equity rally in the U.S. was justified...
"I think as we see the consternation in the marketplace now there is a little pull back. I think people are waiting to see corporate earnings for this quarter to see if there is a justification of this significant rally, especially in U.S. stocks."
...allow us to end the suspense...it's not.
