As the market fell in the fourth quarter of 2018, a lot of people thought the economy was headed to a recession. David Kelly, chief global strategist for J.P. Morgan Asset Management, was not one of them.
“I don’t think we’re headed for a recession this year,” he said at the Investment & Wealth Institute’s Investment Advisor Forum. “I think there is enough momentum coming off a very strong 2018 to keep us going.”
According to Kelly, U.S. economic growth should slow but not stall in 2019.
Kelly said he has called the American economy a “healthy tortoise” for years.
“It has ambled forward happily with a smile on its face growing at 2.3% on average during this expansion,” he explained.
That was until “something funny” happened last year.
“Last year, the American economy got a huge shot of caffeine,” Kelly said. “Because of this tax cut, [which] was very unusual in the tenth year of an expansion, … we got a huge surge in particularly consumer spending. People say the tax cut was aimed at corporations but actually it wasn’t.”
According to Kelly, 77% of the benefits of the tax cut went to small businesses and individuals, which adds power to consumer spending.
“Consumer spending was very strong in the second quarter, in the third quarter, [and] even into the fourth quarter … and that helped growth accelerate to about 3% year over year,” Kelly said.