“This bull market is one of the most unloved bull markets, because everyone missed it and so many have been so skeptical about it the whole time,” said portfolio manager Susan Bao of JPMorgan.
She and other portfolio managers gave a fairly upbeat assessment for the U.S. economy and equity markets on Friday during Raymond James 2018 Women’s Symposium in Tampa, while pointing to possible headwinds from a drawn-out trade war with China.
“We are up 425% off of the bottom of the financial crisis. This is the longest expansion on record,” Bao said.
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The bull market is 10 years old, she added, noting that bull markets don’t have “expiration dates” and end due to recessions. They also run into trouble from excess and euphoria. “I do not see much excess today … and euphoria, where do you see it? I don’t see it anywhere,” Bao explained.
“We have a long recession checklist, and we keep track of it. Most indicators are still green,” said the large-cap fund manager, who has been with JPMorgan since 1997. “The economy is good, and we still have a very healthy jobless rate.”
Still, the spread between two-year and 10-year bond yields is narrow, she points out. “That’s the only yellow sign … and it’s been a pretty reliable indicator for a recession.”
According to Bao, “There are some warning signs, but that’s maybe 18 to 24 months out. The big tail risk is trade. If we have a protracted trade war, that will put some pressure on earnings.” She labels this as the biggest threat to the current bull market.
Catherine Stienstra, head of municipal investments for Columbia Threadneedle, generally agrees.
“People are out spending money. It’s hard to get into a restaurant without a reservation, and it’s hard for restaurants to hire labor,” she explained. “Things like consumer saving are higher and healthy.”
Also, while employment is up, “we are not seeing inflation, and that’s a good thing,” Stienstra said.