- A recession isn't going to materialize for the US economy, Steve Eisman said.
- "The Big Short" investor thinks the US economy is on solid footing.
- That's evidenced by the enthusiasm for AI and infrastructure spending driving the market, he said.
Don't count on a recession striking anytime soon as the US economy looks to be the most dynamic it's ever been, according to "The Big Short" investor Steve Eisman.
The famed investor who called the 2008 housing crash said he believed the US economy was in a good place, despite warnings from some forecasters of a coming recession. The strength of the economy is evidenced by key investment themes driving the market, Eisman said, which typically doesn't happen when the economy is doing poorly.
"In bad times, people focus on better quality and balance sheets, and in good times they focus on stories, and we're in story-time," Eisman said in an interview with CNBC on Thursday.
In particular, Eisman pointed to Wall Street's endless enthusiasm for AI and bets on the America's infrastructure boom. Both are areas that haven been driving the market in recent years. Mega-cap tech stocks like Nvidia and Apple recently notched record highs, while infrastructure stocks have also gained, with the iShares US Infrastructure ETF rising 10% over the last year.
"All the economists who said that, because the Fed raised rates 500 basis points, was going to cause a recession, have been wrong, and we're just powering through," Eisman added. "I think the only conclusion you can reach is that the US economy is more dynamic than it's ever been in its history."
Beginning in 2022, Fed officials raised interest rates by 525 basis points in a little over a year, but high rates haven't pushed the economy into a downturn. GDP growth has remained positive in recent quarters, and the job market is robust, with unemployment near its lowest level in decades.
Central bankers also look poised to start dialing back interest rates later this year, given soft inflation data in the last two months. Markets see a 69% chance the Fed could cut rates three times or more by the end of the year, according to the CME FedWatch tool, which would be bullish for stocks.
Some forecasters are sticking to their recession calls, arguing that there are pockets of weakness in the job market and key sectors like manufacturing. The New York Fed sees a 52% chance the economy could enter a recession by May of next year.