Regions Bank Chief Investment Officer believes soft landing still possible
Alan McKnight believes there will be a reversal in the trend for the past several decades of off-shoring manufacturing.
“These are the times that try men’s souls,” Alan McKnight, Chief Investment Officer at Regions Bank, reminded about 100 individuals as he kicked off his presentation earlier this week at a bank-hosted, invitation-only event at the Bridgewater Place Event Center.
The quote was the famous one that Thomas Paine uttered in December 1776 during the Revolutionary War that secured American independence from Great Britain, and it provided the backdrop for McKnight’s combination presentation and Q&A session.
For more than an hour without any notes, the Birmingham, AL-based Regions executive spent the first 30 minutes offering his insights on everything from the policies of the Fed to curb inflation to near-sourcing that is likely to become a manufacturing trend due to the challenges that supply chains experienced as a result of the impact of COVID-19. Then, for an even longer period, he answered a number of questions from those in the audience.
“While things may be challenging, things from an economic perspective are fairly good,” McKnight told the group. “We believe the Fed is doing the right thing to put a lid on inflation,” adding that he still believes a soft landing, instead of a deeper recession, is possible in spite of geopolitical issues and inflation.
“It’s a tale of two cities,” McKnight said, explaining that job growth is robust among small businesses while job losses characterize larger companies.
“The U.S. is the best house in a bad neighborhood,” he said in talking about the economic challenges facing businesses in Europe and other countries as well as those nations themselves.
McKnight believes there will be a reversal in the trend for the past several decades of off-shoring manufacturing. The recent challenges to supply chains will cause more U.S.-based companies to pull the production of higher-value goods back into the country.
“The Ukraine-Russian war has shown that we are not going back to the way things were before the pandemic,” he added. “We are not going to win the low-cost production game.”
McKnight also commented on these topics:
- The size of the deficit is a real problem;
- Company balance sheets are still in good shape;
- Services spending is “going through the roof” even as there is a pullback in product purchases; and
- Women not returning to the workforce after COVID-19, plus earlier-than-expected retirements during the pandemic, have had an impact.
For those who have a concern about divided government at the federal level, McKnight offered a really interesting insight. “The best returns since 1926 have come when there is divided government,” he said, explaining that it has not mattered which political party controlled two of the three levers.
