Macro Hive Conversations With Bilal Hafeez
Ep. 232: Bob Elliott on US Recession Odds, Fed Policy and Equity Risks
Sep 6, 2024
Bob Elliott, co-founder of Unlimited, shares his expertise in alternative investment ETFs and his past at Bridgewater Associates. He discusses the evolution of economic cycles, emphasizing the shift from credit-driven dynamics to income-based ones, and draws parallels to the 1950s and 60s. Bob expresses skepticism about the Fed's interest rate strategies and analyzes the market risks related to the upcoming US elections. He also examines global monetary policies, particularly in Japan and Europe, while addressing implications for investment portfolios.
36:33
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Quick takeaways
- The current economic cycle relies more on income growth rather than substantial borrowing, indicating greater stability and sustainability in expansion.
- Historical parallels suggest that low borrowing and income-driven growth reflect consumer caution similar to the post-World War II era, influencing today's economic dynamics.
Deep dives
Current Business Cycle: Income Driven vs. Credit Driven
The current business cycle is characterized as an income-driven cycle rather than a credit-driven one. Unlike past cycles, such as the one in 2008 where borrowing significantly supported economic activity, individuals today are financing their spending largely through income growth, which is increasing by about 4% to 5% annually. This trend indicates minimal reliance on debt, as household borrowing levels are reminiscent of recession conditions. Consequently, this results in a more stable and sustainable economic expansion since households are not accumulating excessive liabilities that could lead to economic downturns.
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