On a recent episode of the Odd Lots podcast, we spoke with Neil Dutta of Renaissance Macro Research. He was pretty sanguine about the state of the economy overall. Since our discussion on May 6, the S&P has fallen over 3%, and anxiety about a possible recession has only grown. Nonetheless, Neil is sticking to his guns. So I caught back up with him for a brief interview that we conducted over IB (Bloomberg’s chat tool) on why he’s not worried about a recession or a worsening inflation problem. The conversation has been lightly edited.
Hi Neil. So the market has fallen further since you were on Odd Lots a few weeks ago, and more people are talking about a recession risk. Are you any more worried?
In a word, no.
I think people are conflating a micro issue with a macro one. The stock market is mostly about "stuff" being sold to people and other firms. So, I can see why investors are anxious. But the economy is more about doing things for people, services in other words. And, that part of the economy appears to be booming. People are conflating a normalization of consumption behavior with a recession.
What are the signs you're seeing of that?
As an example, search interest on Kayak has exploded as we have been pointing out. People are search increasingly for foreign routes. That does not strike me as recession-like behavior since flying abroad is usually more expensive than flying domestic.