The nation’s huge debt burden, job losses and other economic data indicate the United States is entering a recession could experience a lengthy slowdown, a bank fund manager told a group of Columbia’s business leaders.
Scott Colbert, the director of fixed income with Commerce Bank in St. Louis, discussed economic conditions and investment opportunities during a luncheon at the Reynolds Alumni Center on Thursday attended by more than 100 people. Colbert has investment responsibilities for more than $7 billion in fixed income assets and is on a team managing the bank’s Asset Allocation Fund.
Colbert said there are opportunities for making profitable investments during the economic downturn and offered suggestions for stock purchases. He recommended investors stick with blue chip companies with high capitalization and his top picks were General Electric, a basket of big pharmaceutical companies, Sallie Mae, Microsoft and Cisco.
After regional Commerce Bank President Teresa Maledy gave an overview of the local economy and introduced Colbert, he said of the Midwest, “this is about the best part of the world right now.”
But overall Colbert said the national economy “is fading” and the odds are better than even that it will enter a recession, and could already be in one.
“To think we will not get there (enter a recession) is probably grossly optimistic,” he said.
Charts and graphs he presented showed the gross domestic product and leading economic indicators are at their lowest levels since 2002, when the nation was coming out of the last recession.
But the “huge headwind” holding back economic growth is the household debt burden, he said.
Household debt as a percentage of personal income is above 16 percent, and personal income isn’t keeping pace, he pointed out.
“We financed our way to prosperity,” he said. “We’re now at a breaking point.”
As for the national housing market, he said it will take “a number of years” to bring down the oversupply and added, “The outlook for housing prices is very glum.”