BlackRock Inc's
The veteran investor's view is that the U.S. has reached a new state of normal after several years of abnormalities following the COVID-19 pandemic and military conflict in Europe.
Rieder said he expects to see 4% nominal GDP growth this year.
GDP, which encompasses all goods and services produced in the U.S., increased at a 3.3% annualized rate in the fourth quarter of 2023. This exceeded Wall Street expectations of just 2%.
"If you get back to four, that's what we've been used to for a couple of decades before massive monetary and fiscal stimulus," he said. " This means you can extinguish this constant talk of soft landing, hard landing. Economy's not landing, it's just we're operating at a really good level."
Rieder's prediction bodes well for the Biden administration ahead of the 2024 presidential election. Voters consistently rank the economy as a top issue.
The U.S. economy also grew 3.1% in 2023. In 2019, before the Covid-19 pandemic, it grew 2.3%.
With the current federal funds rate at between 5.25% and 5.50%, it's widely believed that 2024 will be a year of rate cuts, with some analysts anticipating as much as six rate cuts throughout the year.
Yet late last month, Fed Chair Jerome Powell poured a bucket of ice water on investors expecting the agency to begin cutting rates in March.
Rieder still expects the Fed to do at least "three or four rate cuts this year," as a majority of business economists pull back their recession fears.
As manager of BlackRock's global fixed-income portfolio, Rieder is responsible for the allocation of roughly $2.6 trillion in fixed-income assets.
"I think they'll cut 25 base points every other meeting starting in May or June," said Rieder to the WSJ.
The 2024 presidential election, US-China Relations and Middle Eastern instability continue to present sources of risk. But for him, the biggest risk to any portfolio is that which is not accounted for.
He's still seeing strong consumption patterns despite recent warning calls from heads of big retailers like Walmart Inc
Data shows, according to Rieder, that while the lower-income part of the consumer base is resourcing more to coupons, promotions and limiting their spending, the rest of consumers continue to spend on categories like travel, leisure and restaurants.
"If you have a 3.7% unemployment rate with 4.5% wage growth and job prospects are good and the consumer generally brought down its leverage because they've refinanced their mortgage, consumers will continue to spend," he said.
High-interest rates, however, disproportionately affect the lower-income cohort, and that's why big retailers are seeing the pullback.
Behind Rieder's optimism is the fact that 70% of spending goes to the service sector, which in his view, is not sensitive to interest rate hikes. as specific sectors of the economy like commercial real estate and the low-income strata.
