Economic Strategist Says US is Heading for a Mild Recession
Sam Burns, Chief Strategist at Mill Street Research, believes that the United States is heading for a mild recession within two years. Burns adds that despite the Federal Reserve’s interest rate increases, the US economy will be able to avoid a drawn out and severe recession owing to its strong labor markets and relatively low degree of low leverage.
According to Kitco, Burns has more than two decades of experience working as a macroeconomic analyst, which includes working as a Senior Equity Analyst at State Street and Brown Brothers Harriman. Burns also predicted that once the country enters a recession, the Federal Reserve will change its course and pivot.
“I think if there is a recession, it would be a mild one,” he declared. “I don’t think it’s going to be a severe recession… I think the Fed will then respond to that by cutting rates and helping to offset the effects of slowing growth as we get later into this year and early next year.”
In an interview with Kitco’s Anchor and Producer David Lin, Burns asserted that the Fed’s “hawkish rhetoric” would change over the next six months as the economy enters recessionary conditions. He also noted that a severe recession would likely not be on the horizon due to the stabilization of asset prices, and the strength of labor markets.
“The assets that were the most bubble-looking have really been deflated,” he asserted. “I think the fact that the labor market is still fairly tight… will provide the spending necessary to keep the economy from falling off a cliff.”
In the last few months, the US’s Inflation rate has been decelerating after hitting a peak of 9.1% in June 2022. Burns is of the view that the bulk of this inflation is largely due to economic shocks which are largely subsiding.
“Most of the inflation that we’ve seen over the last couple of years was due to these extraordinary shocks, like COVID, the response to COVID in terms of stimulus, and then more recently Russia disrupting the energy markets,” he declared. “Barring any big surprises, I think that [inflation trending downwards] is going to continue… the year-over-year [inflation] numbers, which of course is what the Fed and a lot of the headlines focus on, will come down to 2 percent as we get closer to mid-year.”
Indeed, the US economy is not in normal shape. While Burns may be a tad optimistic, there’s reason to believe that bad times lie ahead for the economy. This is due to Fed intervention and the US’s bloated regulatory state.
The only way to restore economic normalcy is to reduce the size of the state and enact sound money, which requires a total regime in DC politics for that to occur.