(Bloomberg) -- Nuveen’s Brian Nick is among the several strategists who think economic growth has already peaked as the effect of trillions of dollars in fiscal stimulus wears off. Yet he remains optimistic about the stock market.
“We still have an overall positive view of where the economy is going to be going over the next five or six quarters,” Nick, the chief investment strategist at the wholly owned TIAA subsidiary, said in an interview on Bloomberg TV’s Surveillance Thursday. “That includes a deceleration in year-on-year earnings growth and deceleration in GDP growth, but there is still much more positive than negative out there.”
Federal Reserve Chair Jerome Powell said on Wednesday that the U.S. central bank could begin scaling back asset purchases in November and complete the process by mid-2022, after officials revealed a growing inclination to raise interest rates next year.
Despite what dot-plot watchers see, Nick doesn’t anticipate the Fed boosting rates in 2022 because inflation concerns will abate. The key will be in payrolls data, he said.
“We need to see larger amounts of people re-entering the labor force and entering for the first time in the next couple of months” as pandemic-induced stimulus aid fades, he said. “The question is going to be how many hundreds of thousands or millions of people are back in the labor force. That could put downward pressure on wages, fill some of those 11 million open jobs, and forestall the wage-price spiral. That’s really where the serious, systemic inflation is going to be coming from.”
Nick says investors are “jittery” about decelerating growth in the U.S. and globally and the “fiscal mess” in Washington, where Congress has so far been unable to agree on an infrastructure package and other measures to support the economy and markets. But given his outlook, the Nuveen strategist is investing throughout the range of stocks.
“When you have a period where the markets are going to be focused on low interest rates and decelerating growth, that tends to be good for some mix of growth and defensive stocks,” he said. “What has been working well will continue to work well.”
Looking over the next six months, he added, “I do think there is some juice left in the cycle here. Cyclicals are going to have periods of time where they’re running too.”
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