Recession Fears Are Wrong? Why the U.S. Economy Is Stronger Than It Looks

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**Chris Galipeau** (1:30)
That negative narrative is completely false. It's been for the last two or three years. It's still not true. There's a lot of tailwinds for the consumer. The world doesn't end that often, right? This whole narrative around AI is going to take people's jobs. It's not material at all. What really matters is corporate profitability.

**Adam Taggart** (1:56)
What's your view of US markets right now? I feel like we've got some people really enthusiastic and we have some people that are just extremely concerned. It doesn't seem like anybody's in the middle. I don't know. But how are you feeling about the outlook?

**Chris Galipeau** (2:09)
Polish.
We've actually got a lot of really good data points this morning. So earnings season started this morning in earnest. And so the big banks always lead that off. So this morning we had JP Morgan, Bank of America, Goldman Sachs, Citigroup, I think Wells Fargo, which I didn't get a chance to listen to. And the reason those companies are, I don't know if it's coincidence, but they lead off earnings season. And so one of the things that we can glean from listening to those management teams is the state of the economy, the state of the consumer, the state of the spending of their consumers. In the case of the investment banks like Goldman, what do they see on a go-forward basis for capital market activity, investment banking activity? They have been super consistent now for six quarters in a row. So if you go back to the first quarter of last year, here's what the banks have told us. The consumer is in much better shape than you hear about and read about.
JP Morgan even said this morning that this K-shaped economy notion is not true, and they gave us the data to support it. But they've talked about consumer spending patterns right along. They've talked about the quality of their loan books, their credit quality in terms of delinquency rates and NCOs and their charge-offs. All of that has been improving for 18 months. So at a high level, the economic backdrop is fine. And the stock market is not the economy, and the economy is not the stock market. But that's a pretty good starting point, and the earnings picture reflects that.

**Adam Taggart** (3:42)
It's so interesting.
What is holding up the consumer? Because, and I asked that, because I feel like the narrative has been like, well, it was all the, you know, fiscal checks and the COVID checks. And then that went away. And okay, it was the sort of booming stock market. And there's always a feeling that it's gonna be a rug pull. And in the wings is AI coming to take everyone's job. And it's kind of painted this picture of concern that we're kind of, you know, one sort of blip away from recession. Very different picture from what you just painted. Where's the strength coming from supporting consumers?

**Chris Galipeau** (4:18)
Yeah, it's funny that you say that because in the course of, you know, any given day, I'm talking to our clients around the country, around the world, and we get the same questions.