Carl Tannenbaum Address at CBOE Risk Management Conference

The final day of the Risk Management Conference began with Carl Tannenbaum from Northern Trust discussing his current outlook for the economy.

He started out saying the US is in a pretty good economic position so far with growth iaveraging 2% since the financial crisis.   However growth is typically in the 4% to 5% range after a crisis so there is room for improvement.  Joblessness has fallen but remains high and long term unemployment continues to be a challenge.   A large number of people have given up looking for work and some of this is due to retirement and some is cyclical.  One reason Tannenbaum is optimistic on the US economy is due to the wealth effect based on an increase in home and portfolio values.   Many households have deleveraged with debt to income down to levels not seen in over a decade.   On a very positive note, Tannebaum is encouraged with a renaissance in energy production in the US.

He stated that American fiscal policy is better than it was a few years ago.  Things have improved since the bank stress tests in 2009 and 2013 was a good year as the government deficit was at low levels.  Over the near term government deficit spending is expected to remain at low levels relative to GDP.  Longer term spending on health care may be a drag due to the aging of the US population combined with continued healthcare inflation.

He believes that the transition for the Fed should be smooth one from Benanke to Janet Yellen as their ideology is very similar.  Currently US monetary policy remains aggressive with short term rates remaining near zero but asset purchases have started to taper off and short-term rates remain near zero.  Tannenbaum believes the Federal Reserve has done a good job with the quantitative easing program.

Tannenbaum spent some time discussing what he is focused on outside the United States.  He feels that Europe did not address their banking issues as well as the US did.  Also, issues in China that need to be addressed include the shadow banking system, property speculation, environmental concerns, corruption, and federal versus local incentives.

In closing Tannenbaum is looking to 2014 and potential issues that include if US growth will reach a higher level, will politics continue to be a challenge for economic decisions, can the Fed continued to taper without disrupting financial markets, will Europe’s recovery gain traction, and the fate of emerging markets.

Carl Tannebaum’s thoughts on the economy can be found at –