Its not Recession, but the evolving Dynamism of US Economy: Steve Eisman

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Don’t expect a recession anytime soon, as the US economy appears to be more dynamic than ever, according to “The Big Short” investor Steve Eisman. The renowned investor, who predicted the 2008 housing crash, believes the US economy is in a solid position despite some forecasters predicting a recession. Eisman attributes this strength to key investment themes driving the market, which typically isn’t seen during economic downturns.

“In bad times, people focus on better quality and balance sheets, and in good times, they focus on stories. Right now, we’re in story-time,” Eisman said in an interview with CNBC on Thursday.

Eisman highlighted Wall Street’s ongoing enthusiasm for AI and investments in America’s infrastructure boom as significant drivers of the market in recent years. Mega-cap tech stocks like Nvidia and Apple have recently reached record highs, while infrastructure stocks have also gained, with the iShares US Infrastructure ETF rising 10% over the past year.

“All the economists who said that the Fed raising rates by 500 basis points would cause a recession have been wrong, and we’re just powering through,” Eisman added. “The only conclusion you can reach is that the US economy is more dynamic than it’s ever been in its history.”

Since 2022, Fed officials have raised interest rates by 525 basis points in just over a year, yet these high rates haven’t triggered an economic downturn. GDP growth has remained positive in recent quarters, and the job market is robust, with unemployment near its lowest level in decades.

Central bankers also seem poised to start dialing back interest rates later this year, given the soft inflation data over the last two months. Markets see a 69% chance the Fed could cut rates three times or more by the end of the year, according to the CME FedWatch tool, which would be bullish for stocks.

Despite Eisman’s optimism, some forecasters continue to predict a recession, citing pockets of weakness in the job market and key sectors like manufacturing. The New York Fed sees a 52% chance the economy could enter a recession by May of next year.