MUKILTEO — The economy will continue to struggle in some areas, but a recession doesn’t seem to be on the near horizon.
That’s the view of Michael Ryan, head of wealth management research for the UBS financial firm. In a visit with clients of the firm’s Everett office, the New York-based Ryan said the soft housing market will continue to be a drag on the economy.
How long will the housing market take to recover? Considering that the inventory of available homes is at a post-World War II high right now, it will take a while — well into next year, Ryan said.
And the other key driver of the economy, consumer spending, likely won’t grow much, either, he said. The jobless rate also is expected to creep up. Overall, gross domestic product growth is expected to increase about 2 percent annually both this year and next.
“In certain quarters, in certain industries, this will feel like a recession,” he said.
The upside is that tepid economic conditions should keep inflation tamped down. And those factors should give the Federal Reserve board reason to act. “As inflation ebbs and employment goes down, that gives the Fed room to maneuver,” he said, predicting more interest-rate cuts will be on the way.
That should help buoy stock markets.
“In an environment where the economy is slowing and the Fed is cutting rates, equity markets tend to do pretty well,” he said during his talk at the Future of Flight Aviation Center.
He said other factors that should keep the economy from a full-blown recession include the fact that most corporations are in good shape, with many having paid down debt and improved their balance sheets in recent years.
“Given the fact we don’t see the U.S. falling into recession, stocks should do OK, not spectacular,” Ryan said.
The best advice he has for investors is to be “domestically defensive and internationally opportunistic” in the near future.
That means steering toward U.S. stocks in the consumer goods and health care sectors, as well as in companies involved with technology or industrial businesses. The latter, which would include the Boeing Co., should do well from sales to overseas customers. Similarly, stocks of large companies should do better than small-cap stocks, because bigger companies tend to do more business overseas.
And the global economy is expected to grow better than that of the U.S. alone.
“It doesn’t just start at the Atlantic and end at the Pacific anymore,” he said. “The U.S. economy matters less than it has in decades.”
He said that’s good news for companies that export products overseas, including Boeing and Microsoft.
Specifically on Boeing, Bill Carroll of UBS told local investors that Boeing’s stock, hovering around $104 to $105 a share, is still a good buy. He sees strong demand for airliners and Boeing’s strong position compared with that of Airbus continuing for at least the next few years.