As the Dow and S&P 500 hit an all-time high Thursday morning in early trading, Kewsong Lee, co-CEO of The Carlyle Group (CG), sees no imminent risk of recession and predicts the U.S. economy will continue to grow.
“For the next year, I don’t think we really see a global recession by any stretch and I think there’s too much strength in the U.S. economy,” Lee said at Yahoo Finance All Markets Summit on Thursday. “There is real underlying strength and momentum in the economy. And as long as that doesn’t get derailed in any terrible way, you could see this thing kind of lumber along for a little bit longer.”
Even when the recession hits, it could be mild in terms of scale, according to Lee. He describes the growth in the global economy and in the U.S. as “low and steady,” indicating limited leveraged bubbles.
“You didn’t really see a bounce back and that low and steady growth has happened in a way where there aren’t really a lot of excesses in the economy. You don’t really see a massive amount of leverage. That makes it really hard for there to be a really bad event in terms of a recession,” Lee said.
Washington DC-based The Carlyle Group is a prominent private equity firm with more than $200 billion of assets under management. Through analysis from its portfolio companies across the globe, Lee said the underlying growth rate in the U.S. accelerated from last year, while Europe and China have seen some slowdown. “I think the current view is how long can this go on where the U.S. keeps propelling the global economy forward,” said Lee.
In response to the diverging performance of the economies across the globe, central banks are forming different monetary policies. The Federal Reserve in the U.S. is trying to raise interest rates, while China’s central bank is lowering its rate and the EU and Japan are taking a cautious approach. Lee said that could signal some market volatility.
“Whenever you have that type of divergent policy, it sets up for a very volatile exchange rate which we’ve seen. And it sets up maybe, if we’re not careful, for a policy mistake and that wouldn’t be fun either,” warned Lee.
The Carlyle Group has 10% of its assets exposed to China. Amid the trade war between Washington D.C. and Beijing, Lee said Carlyle doesn’t plan to change the way it does business in the country. “We’re quite bullish on opportunities in China over the long term,” said Lee.
Krystal Hu covers technology and economy for Yahoo Finance. Follow her on Twitter.