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“The U.S. economy is the star economy these days,” Fed chair Jerome Powell told the House Budget Committee today, November 14. “There is no reason to think that I could see that the probability of a recession is at all elevated at this time.”

“Our forecast is, and our expectation very much is, one of continued moderate growth,” Powell continued. That means, he explained, economic growth of 2% and a continued very tight job market with no uptick in inflation. The Federal Reserve’s economists project growth of 2% in 2020 and 1.9% in 2021. Economists surveyed by Bloomberg forecast growth of 1.8% in 2020 and 1.9% in 2021. White House trade advisor Peter Navarro said recently that the economy could growth by 2.5% or even 3.0% if the U.S.-China trade war is settled and if the Fed gets out of the way. The official unemployment rate is near a 50-year low near 3.6%.

The current economic expansion was “notable” for its lack of sectors that are “really hot,” Powell said. “I would say this expansion is on a sustainable footing,” Powell added. “We don’t see the kinds of warning signs that appeared in other cycles yet.” The same goes for financial markets, which “don’t have this notable build-up of leverage broadly across the economy, which is troubling from a financial stability standpoint.”

“There is no reason why it can’t last, at the risk of jinxing us, in principle there is no reason to think that I can see that the probability of a downturn is at all elevated,” Powell said.

The take away here when it comes to interest rates is that the Federal Reserve is on pause after its October 30 cut to a range of 1.5% to 1.75%.

Markets agree with Powell’s portrait of the U.S. economy. The Fed Funds Futures market is pricing in steady interest rates through the middle of 2020 and no interest rate cut until September 2020.

There are a couple of clouds on the horizon.

First, U.S. and Chinese negotiators still haven’t agreed on the terms of a Part 1 deal in the U.S.-China trade war. The sticking points seem to be a U.S. demand that China spell out monthly and quarterly goals for purchase of $50 billion in U.S. farm commodities. China continues to insist that the two sides agree to rollback tariffs in phases if a deal is reached.

Progress on the agricultural front outside the talks has been mixed. Today, China lifted a ban on American poultry that began in 2015, saying it would allow imports from qualified suppliers. Trade Representative Robert Lighthizer, in a statement on Thursday, said the government estimates American producers will be able to export more than $1 billion worth of poultry to China annually.

But China has held up about 1.8 million tons of soybeans, headed for state reserves by and large, at Chinese ports. Local buyers are being asked to pay a hefty deposit–as much as $8.5 million–to customs officials before they can collect refunds on the 30% tariffs which China imposed on U.S. soybeans during the trade war.

And second, global debt hit a new record above $250 trillion in the first half of 2019, according to the Institute of International Finance. China and the United States account for more than 60% of new borrowing. Borrowing by governments, households and non-financial business now accounts for more than 240% of the world’s gross domestic product, and it’s growing faster than the global economy. In developed countries governments account for the bulk of borrowing over the past decade. In emerging markets, companies have taken the lead–but more than half of corporate debt in those countries is held by state-owned businesses. The report sites the dangers of the debt build up to emerging markets that have increasingly relied on foreign-currency borrowing, such as Turkey, Mexico and Chile. It also flagged the risk to high-debt countries that have a high exposure to climate risk, such as Japan, Singapore, Korea and the United States. The effort to fight the effects of climate change will require a big increase in spending on top of current high debt loads.

Neither of those clouds is priced into markets today, although stocks are going nowhere despite Powell’s vote of confidence.

As of 3 p.m. New York time the Standard & Poor’s 500 was up 0.02% and the Dow Jones Industrial Average was down 0.05%. The NASDAQ Composite was lower by 0.09% and the Russell 2000 small cap index was off 0.11%. The iShares MSCI Emerging Markets ETF (EEM) was lower by 0.15%.

Gold was ahead 0.57% to $1471.60 an ounce and silver moved higher by 0.48% to $17 an ounce.

The yield on the 10-Year U.S. Treasury fell to 1.82% from 1.88% yesterday as bond prices edged higher. The yield on the 2-Year Treasury was at 1.59% after 1.63% yesterday.

The dollar lost some ground with the Dollar Spot Index (DXY) falling 0.20%.