How close is the next recession? Not very, according to James Swanson, chief investment strategist for MFS Investment Management, dismissing the first quarter’s GDP contraction as a fluke.
Swanson focused on the sustainability of the current economic cycle during the MFS midyear investment roundtable in New York on Tuesday afternoon, confirming what others, like LPL Financial Research and JPMorgan, have also recently concluded.
“I see this cycle as a sustainable, longer-term, more durable cycle,” he said, adding, “I do think this is closer to a 7- or 8-year cycle, not a 5- or 6-year cycle.”
Since World War II, the average cycle — which can range from two to 10 years — has been about five years. And, as Swanson said, the current cycle is just two weeks shy of its fifth birthday.
Something that might normally cause worries of impending recession — like the U.S. economy shrinking by 2.9% in the first quarter — Swanson questions.
“Now to me that’s sort of a mini-depression, if you will,” he said. “I haven’t seen those kinds of numbers in a long time. I thought it was pretty shocking. I just want to submit my first case here that I don’t know if it felt like a mini-depression to you or a sort of one-quarter recession, but it didn’t seem that way to me. I travel on airlines, I look at parking lots on the train on the way to work and things seem to be kind of normal, except for some bad weather.”
Swanson said that any downturn like this should have also shown a collapse in the earnings of the companies in the S&P 500 index. But it didn’t.