While an interest rate hike by the Federal Reserve in December would be “a policy error” because there’s currently overcapacity — “too much stuff” — the Fed and lawmakers are not to blame for the U.S.’ current economic slowdown, William Miller, chief investment officer of Brinker Capital, said Monday.
Speaking at the Financial Services Institute’s annual advisor conference in Washington, Miller provided answers to some “meddlesome” questions that advisors are likely to get from their clients during a session on the economic outlook.
As to monetary policy, Miller said that it “couldn’t get any looser” with zero interest rates, and that if the Fed raises rates “that’s a policy error” because “there is too much stuff; we have to absorb all this stuff — it’s going to take time.”
Miller argued that Washington “is actually trying to increase demand” for goods, but that the U.S. along with Europe and China all face decreasing populations.
“There’s too much of everything,” Miller said, “too much glass, rubber, sneakers, steel. And the demand curve is stubborn” because of lagging population growth.
He opined that opening the doors to more immigrants would bode well for such population problems, but noted that he’s “bipolar” when it comes to the economic impact of the Syrian migrant crisis in Europe.
“The economist in me likes it [the migrant crisis]” because it means an increase in population, “but the costs, immediate costs, of all the immigrants will be expensive.” Germans “are not reproducing, so in that way it’s positive.”
As to emerging markets, Miller said he liked India but that Brinker currently “doesn’t like” Brazil, Russia or China.
“You’re more likely to have more problems from the export-driven emerging markets,” he said.
Miller also noted that he worries “greatly” about the tech boom, because it means there will be “more computers picking stocks than me.” However, “with all this technology” the U.S. should have more productivity, “but we don’t.”
Another worry: jobs. “I greatly worry about jobs,” that the U.S. is “not creating enough jobs.”
As to the presidential election, Miller said that with the “poor Republican field” of candidates “there’s a tendency to move left,” and that current tax policy has allowed “the top 1 percent [to] benefit from lower taxes.”
Advisors can also expect their clients to start spending more beginning in the fourth quarter, Miller said, because oil prices dropped nearly a year ago. “Twelve months after oil prices fall is when you have the biggest kick,” he said.