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Walker Webcast: Linneman Advises Stocking Up on Assets Now
In the seventh of what has become a quarterly series on the Walker Webcast, economist Peter Linneman told viewers that now is the time to load up on assets. The outlook is bright for growth in employment and GDP in the next 12 months, yet investment volume—and pricing—haven’t yet come to reflect this outlook. Or, as Linneman would put it, in the contest between greed and fear, fear still has an edge.
As evidence, Linneman pointed to consumers’ bank deposits, corporations’ cash reserves and investors’ unused dry powder. All three are at considerably higher levels currently than they would be if the economy had thrown off all caution some 19 months into the global pandemic.
“We’re not in paralyzed fear,” as we were during the global financial crisis of 2008 and in the spring of 2020, the Linneman Associates founder told Walker & Dunlop CEO Willy Walker. “But we’re a long way from greed setting in.”
Walker noted that second-quarter GDP was remarkable at $22 trillion, even with what Linneman calculates are 13 million U.S. workers still idle—a higher estimate than official U.S. unemployment figures. Asked whether this represented a “new normal” for the economy, Linneman said no.
GDP growth would have been even stronger had the pandemic not resulted in a shutdown of much of the economy in the spring of 2020, he said. An economy that has been largely shut down doesn’t simply start up again as easily as a car engine, he pointed out.
As for the still-high jobless rate, Linneman said it will have to be brought down sooner or later in order for growth to continue. Historically in every recovery, he said, there has come a time when “you’ve got to bring back more labor.”
With the prospect of more hiring in the months ahead, Linneman has a bullish outlook on growth. Both on the webcast and in his just-published quarterly Linneman Letter, he projected that six million jobs will be added over the next 12 months, and that we’ll see GDP growth of between 4.5% and 6.5%. “And we’ve got the runway to do it,” Linneman told Walker.
Current trendlines are seeing the incidence of new COVID-19 cases—driven by the delta variant—declining, Linneman said. That decline, and what presumably will be an increase in the vaccination rate, bode well for the economy.
“The good times are going to be even better, especially as delta hopefully gets farther away in the rearview mirror,” said Linneman.
On-demand replays of the Oct. 6 webcast are available by clicking here and through Walker & Dunlop’s Driven by Insight podcast series.
- ◦Economy
