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The current economic expansion and bull market are now both nine years old. So it’s not surprising that many economists and market watchers have begun to warn that a potential slowdown may be lurking around the corner.
But one soothsayer who commands a great deal of respect on Wall Street and Main Street isn’t having any of it. His name: Warren Buffett.
The Oracle of Omaha says the U.S. economy has plenty of runway left before the next recession. “Right now, there's no question: It's feeling strong. I mean, if we're in the sixth inning, we have our sluggers coming to bat right now,” Buffett said in an interview with Becky Quick on CNBC’s “Squawk Box” Thursday morning.
Buffett added: “Business is good. There's no question about it.”
How Much Longer Can the Economy Keep Growing?
Doing the math on Buffett’s analogy, if the ninth year of the economic expansion is equivalent to the sixth inning of a baseball game, then that would mean there’s a good chance the good times will keep rolling for another four to five years. That would stretch the economic cycle into 2022 or 2023.
Jamie Dimon, J.P. Morgan’s CEO who also participated in the CNBC interview, supported Buffett’s claim, arguing that business and consumer sentiment remains strong.
The two men paint a far rosier picture than most economists, who are warning of a potential pullback as early as next year.
The National Association for Business Economics, in its most recent quarterly outlook, found that among its members, there’s a growing concern about the impact tariffs and a trade war could have on gross domestic product. Two-thirds of the NABE's economists believe that a recession could show its head as early as 2020, while 18% of its economists think it will hit as early as 2019.
They’re not alone in this sentiment.
Due, in part to the Trump tax cuts during a time of what’s referred to as “full employment,” other economists and investors believe the Federal Reserve will have to increase interest rates faster than expected in order to hold off inflation. This could crimp investment.
Scott Minerd, Guggenheim’s chief investment officer, believes the worst could hit next year. Meanwhile, hedge fund founders Paul Tudor Jones and Ray Dalio both have stated that a downturn could hit by 2020, at the latest.
Why Warren Buffett Is So Bullish On the Economy
It’s all the more intriguing that Buffett has shown such enthusiasm for the U.S. economy.
It’s important to remember that Buffett himself admits he’s not always the best at predicting where the market will move in the short-term. Instead, he’s made his mark by betting on the long-term benefits of the U.S. economy.
“I'm no good at predicting out two or three or five years from now, although I will say this: There's no question in my mind that America's going to be far ahead of where we are now 10, 20 and 30 years from now,” Buffett said in the “Squawk Box” interview.
That’s worth taking note, whether we see a recession next year or not.