Ron Insana, a business and economics journalist and money manager, covers the most pressing economic and market issues of the day. A senior analyst and commentator with CNBC, Isana is also the author of four books on Wall Street. During the past 40 years, he’s conducted high-profile interviews with billionaire investors Warren Buffett and George Soros, business leaders such as Bill Gates, Jack Welch, and Steve Jobs, and top leaders in politics and economics.
A keen observer of market and economic trends, he will deliver the keynote speech on Thursday, May 9, at 9:00 a.m. at the MPL Association Conference in Washington, D.C. Inside Medical Liability Online spoke to Insana about the upcoming election in the context of the market and the economy.
IML: What does the US economy look like heading into the 2024 election?
Insana: From the data we have in front of us now that we know to be true, the economy in the US both in absolute and relative terms is in good shape. We’re growing better than 2%. We're growing slightly above potential. Inflation has come down an awful lot, more than people had anticipated. The Fed [US Federal Reserve Board] is getting ready to cut rates, which is a positive backdrop for the economy in 2024. I'll get to the trouble spots in a minute.
The fourth year of a presidential cycle is typically the second best one for stock market performance. We had a good year last year, which was the third year in the cycle, which is typically the best, and I expect kind of like mid- to upper-single-digit gains for the equity markets. And barring any large unforeseen circumstances, and this is what I've really been focused on lately, it looks like an abnormally normal year from an economic and market standpoint. We’re looking at a 2, 2.5, or 3% economic growth rate, moderating inflation, and decent market returns for this year.
IML: How do you evaluate the risk for a recession?
Insana: Risk of recession is there for a couple of reasons. There’s a big exposure in commercial real estate that could affect the financial system a little bit. There are also delinquencies in credit cards and auto loans hitting levels normally associated with a recession. There is some risk to the growth forecast, but that is at least to a certain extent offset by the likelihood that the Fed will cut rates and take some of the pressure off.
IML: How does this economic and market backdrop affect the upcoming election from your point of view?
Insana: Unless the economy falls into a recession or inflation reaccelerates, which is not my view, Biden has a good story to tell. The question is whether the economy is the main story or whether other issues such as mental acuity, age, legal issues, social issues like abortion or LGBTQ rights, voting rights, plus the democracy versus autocracy issues are the story. It is hard to tell which one is going to play the most heavily.
IML: Is there anything unique about this election or do we just think that about every election?
Insana: I would say it is an unprecedented year given that you have an 81-year-old incumbent and a 77-year-old former president who has been indicted four times. If Trump gets convicted, he can still run, he just can’t vote for himself because convicted felons can’t vote. In that respect, I think the politics is far more unusual than the economics.
IML: Given the divisive nature of recent politics and the shifting nature of geopolitics and macroeconomics, how can our audience prepare themselves for the next six-months-plus before the election mentally and emotionally?
Insana: I don’t know how you prepare for the amount of invective. Obviously, it’s gotten worse with each passing election. But I never use the word unprecedented. American politics has been dirty all along, but this one is, from an institutional perspective, maybe the most consequential election we’ve had since 1860.
I don’t know how you prepare for it emotionally. The news cycle is different, the level of intensity and exposure is radically different than in other periods. Most people are in reasonably good shape economically, but I don’t know if that will be true socially or emotionally by the time October and November roll around.
IML: What sense are you getting of the electorate’s feelings about the economy?
Insana: From the data we’ve seen one interesting fact is that people’s perspective of the economy is really driven by their party affiliation, which wasn’t as true in the past. Out on the speaking circuit, someone will pull me aside and ask, ‘Wasn’t the economy better under Trump?’ And I reply, ‘By what measure?’ I’m not being a smart aleck when I say that because the economic measures and unemployment between Trump and Obama’s last four years are very similar outside of the pandemic.
Biden’s numbers are Biden’s numbers. They are hard to argue with, including the CHIPS and Science Act, the Inflation Reduction Act—which really was an infrastructure bill—really helped grow the economy from the bottom up and the middle out as they like to say. I tend to believe that is true. When you look at some of the polls about the economy, in the aggregate people think it’s bad, but their individual circumstances are fine, so there is a big disconnect in those numbers as well.
IML: Where do you think that comes from?
Insana: People are worrying about long-term issues, which is kind of surprising. It’s the first time I’ve seen anyone care about the long term in a long time. There’s also, between cable news and social media, so much noise and so much misinformation particularly when people are married to a particular single point of view, which really colors how they look at the world.
IML: Given everything that’s been happening, what was the one market or economic event that surprised you in 2023?
Insana: The fact that the economy was relatively immune to dramatic interest rate increases. I figured out the answer in the middle of the year, which was that most people who owned homes had very low rate mortgages that weren’t affected, and it was the same for corporations, which termed out their debt.
There was a lot less interest-rate sensitivity in the economy than I would have thought. So the steepest increase in rates that we’ve seen since the late 1970s and early 1980s didn’t have the same type of impact as it did then.
IML: What was one thing that didn’t surprise you that surprised others?
Insana: I maintained all along that this was not another 1970s experience, that it was more like a post-war supply shock that would take a couple of years to work itself out with inflation. I didn’t think it was a replay of the ‘70s given the number of crises we went through in the ‘60s, through the ‘70s, and into the ‘80s with one thing that fed upon another that led to 11% unemployment and 20% interest rates. I insisted for a long time that inflation would fall faster than some of my peers and some former Treasury officials had projected and that’s turned out to be the case.
IML: Finally, how are you feeling about the market and the macroeconomic environment in 2024?
Insana: I think both in absolute and relative terms the US is doing fine. We are outgrowing the G-7 [Group of 7 Nations]. In nominal terms we actually outgrew China last year with less inflation. It looks like we will continue to grow at this trajectory, barring a real escalation in the Middle East or Russia making big gains in Ukraine and disrupting oil markets, which we’ve seen a little of that, but not a lot.
I’m comfortable with where we are. I’m keeping my eyes open for things that could blindside us, like China taking a shot at Taiwan, which would be a game-changer. That would be the kind of activity that would create a global recession/depression scenario because we’d end up cutting China off from the Western world and they would cut us off from Taiwan Semiconductor [the world's largest semiconductor chip manufacturer with a market share of more than 50%]. We’d have a lot of trouble if something like that happened. These are the things that I keep in the back of my mind, but on the face of it right now, things look okay.
People talk about a psychological recession, but there is no such thing. People either spend money or they don’t. Unemployment is up or it’s down. The numbers are the numbers. We’ve gone 24 months with unemployment under 4%, which is the longest stretch since the mid-1960s. So, I’m not counting us out.
IML: Thanks for your time, Ron! See you in May.
Insana: Thanks.
