Charles Schwab Chief Investment Strategist Liz Ann Sonders sees weak growth for the U.S. for “quite some time” — though she doesn’t see another recession on the horizon — and says eliminating regulatory uncertainty is a key to stabilizing the business climate and creating jobs.
“Slow growth at best,” Sonders says of her expectations for the U.S. economy this year and next year, in an interview with Harlan Levy on Seeking Alpha. “The biggest impediment to growth longer term … is debt and the deleveraging cycle. When government debt as a percentage of Gross Domestic Product is as high as it is right now, 96 percent, it is really really hard to get the economy to grow at anything resembling a normal pace. Even if we get a lift in the second half it will be a marginal lift, and we’re probably in an environment of slow growth for quite some time.”
Sonders — whose calls of the start and end of the “Great Recession” both proved very accurate — says confidence, or lack thereof, is playing a huge role in the economy and markets, something policymakers have been slow to realize. In fact, she says that the European debt crisis actually doesn’t have a tremendous amount of impact on the U.S. in terms of fundamentals. “But it’s certainly having a psychological impact on confidence and stock market volatility,” she says.
“This confidence crisis is more than just an esoteric thing. Rather, it’s something that’s actually having a dampening effect on Gross Domestic Product growth and the market, too. You get the diminishing wealth effect, which doesn’t help our confidence in the economy and hits actual net-worth numbers.”
With the future of tax and healthcare policy very much up in the air, Sonders says businesses are in a holding pattern. She says “most businesses would be happy to accept things they don’t like on the tax or regulatory or healthcare front, and if at least we know the rules of the game and that they’re static, nor dynamic, businesses can get back to making decisions about hiring and investing.” The notion that short-term incentives — which President Obama is offering in his jobs bill — can spur hiring is off the mark, she adds. Hiring is “based on long-term conditions, and it’s very hard to plan when there’s still so much coming down the pike in terms of potential change,” she says.
Sonders also says she tends to think the Euro will survive as a currency, “because the cost of the euro as a currency imploding is significantly higher than several defaults on the part of peripheral countries.”