Stocks extended their gains for the second-straight day Thursday morning following Monday’s sell-off as the Fed signaled rate hikes of six to seven times by the end of 2024, suggesting optimism in the economic recovery. And in spite of looming developments surrounding China Evergrande (3333.HK), Truist Wealth (TFC) Co-CIO Keith Lerner believes that the U.S. economy remains in a good position.
“From a U.S. standpoint, we're a relatively closed economy,” Lerner told Yahoo Finance Live. “[Evergrande] doesn't change the consumer position, and we still think the economy is on solid footing.”
Although he believes that peak growth as a result of accelerated pandemic recovery efforts has passed, Lerner is optimistic for the economy going into 2022.
“We still think we are past peak growth, but we think economic growth will likely be well above trend into next year,” Lerner added. “There's still a lot of pent up demand from the consumer side. And let's be honest, there's not a lot of great relative opportunities outside of the equity market today.”
Lerner joined Yahoo Finance Live to discuss the gains taking place within the market in light of the Fed talks, Evergrande’s continued effect on the market, and prospects of economic growth in the coming year.
Ultimately, Lerner cited a “reset” of expectations for the coming months due to a disappointing September as being one of the main reasons to be hopeful for the near future.
“The economic surprise index shows that the economy has been missing estimates,” Lerner said. “But we're at a point historically where we are set up for positive surprises. And also as we have to rebuild these really depleted inventories —I think that's going to help keep this economy moving forward.”
'Not the next Lehman'
Experts also continue to contest the notion that the Evergrande debt crisis will lead to a “global contagion” on the same level as the Lehman Brothers default in 2008.
And according to Lerner, investors have been preparing for a “significant haircut” regarding the implications of Evergrande’s debt for months.
“The first thing with Evergrande — even though it became front and center on Monday — this has been an ongoing issue for several months,” Lerner added. “In fact, the stock itself was down over 90% from its high. If you look at the bond market yields on their debt, [it] was over 60%.”
Lerner is confident, with its over $3 trillion in reserves, that the Chinese government may step in to help manage Evergrande’s debt woes if needed. A recent report has suggested that Beijing has indeed been preparing for the downfall of the property development giant.
Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter: @thomashumTV