WH Trade Director Peter Navarro Predicts a 'Bullish Cycle Going Through 2020 and Beyond'

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By Susan Jones | August 19, 2019 | 5:30 AM EDT

Peter Navarro is President Trump's director of trade and manufacturing policy. (Photo by Win McNamee/Getty Images)

(CNSNews.com) - White House Trade Adviser Peter Navarro downplayed talk of a recession on Sunday, predicting that the global economy "will have a bullish cycle going through 2020 and beyond."

Appearing on ABC's "This Week," Navarro said the longest expansion in U.S. history -- 121 consecutive months, since June 2009 -- will continue:

So, before I came to the White House I spent a better part of 20 years forecasting the business cycle and stock market trends, and what I can tell you with certainty is that we're going to have a strong economy through 2020 and beyond with a bull market, and here's why -- things are shaping well.

 

First of all, the Federal Reserve going into the holidays will be lowering rates significantly. What that will do it will help our investment directly and help our export indirectly through a currency effect.

Secondly, the European Central Bank has signaled strongly they're about to engage in a very aggressive round of monetary easing that will help not only revive the economy of Europe, but also help build export demand.

I think China is going to have a second round of fiscal stimulus. What that will do for the global economy is help the developing countries that sell them all the commodities for their manufacturing machine.

By early October, if Congress rises above partisan politics, we should have passage of the U.S.-Mexico-Canada trade agreement. This is without hyperbole, the largest trade deal ever in history. It's also going to give us hundreds of thousands of more jobs, more growth points, and there is a couple of other things I should mention--

Host Martha Raddatz interrupted him, noting that his analysis includes a "lot of ifs."

Navarro repeated: "The Fed will be lowering rates. The ECB (European Central Bank) will be engaging in monetary stimulus. China will be engaging in fiscal stimulus. You're absolutely right, there's also an ‘if’ associated with the USMCA.

There also is an if with Brexit over in Europe. This is important, because that has suppressed investment in Europe. I think, by October 30th that situation is going to be resolved one way or the other. So things are shaping up well for stimulus worldwide."

Navarro dismissed recent talk about a "flat yield curve," which some pundits warn is a sign of impending recession.

"I love to talk about the yield curve," Navarro said, referring to the difference between short-term and long-term rates for bonds of the same credit quality.

"I didn't write the book on the yield curve, but I actually wrote several books on the efficacy of the yield curve as a leading economic indicator.

“Now, first of all, we did not have a yield curve inversion right now, by technical standpoints. You have to have a significant spread between short and long rates. All we have, Martha, is a flat curve.”

Navarro called it a "very weak signal," and he said the yield curve is flat for "good reasons."

We have the strongest economy in the world. Money is coming here for our stock market. It's also coming here to chase yield in our bond market. Now, what that does is, when foreign money comes in, it drives the prices of bonds up and yields down. That flattens the curves.

So, all what needs to happen here, Martha, is for the Federal Reserve to do what it needs to do, which is begin lowering interest rates. There's a general consensus now on Wall Street and everywhere else in this country that the Fed raised rates too far, too fast.

We came in at Q2 at 2.1 percent GDP growth rate. We should have been at 3. And the Federal Reserve's precipitous interest rate hikes actually cost us a full point of growth.

All we need, Martha, is to reverse that, have Europe do what they need to do, China do their fiscal stimulus, and the global economy will have a bullish cycle going through 2020 and beyond. That's my message to the American people.

 

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