The following is a transcript of an interview with Aditya Bhave, senior economist at Bank of America, on “Face the Nation with Margaret Brennan” that aired on Dec. 29, 2024.
MAJOR GARRETT: We turn now to the economy and what to expect in year 2025. We do so with Bank of America senior economist Aditya Bhave. Aditya, good morning. It’s great to see you. I’ve covered a lot of presidential transitions. There’s always an assessment by the outgoing president about what kind of economy he’s giving to his successor. That’s a political conversation. Objectively, what is the economy the incoming Trump administration is inheriting?
ADITYA BHAVE, BANK OF AMERICA SENIOR ECONOMIST: Good morning. Thank you for having me so we think the economy has really solid momentum going into next year. You can look at our internal card data, for example, that shows a nice acceleration in spending going into the holidays. You can also look at the TSA data on airport traffic, and that looks really strong around the holiday period as well. You can also think about things via a wider lens. Start in 2022, that was a year in which GDP grew by only 1%, CPI inflation peaked at 9% and all of the talk back then was stagflation. When, not if, is a recession going to arrive, why are workers quiet quitting? And then you look at what happened over the following two years, right. This was quite unexpected, and in a very pleasant way. 3% GDP growth, inflation coming down, labor productivity moving up. So all positives that leave us optimistic going into next year that we can continue to grow above 2% albeit with somewhat sticky inflation.
MAJOR GARRETT: Is there any larger X factor in 2025 than the scale and scope of promised mass deportations of the Trump administration?
ADITYA BHAVE: From a market perspective, I think the two biggest issues will actually be fiscal policy and trade policy, and there’s a lot of uncertainty around those as well, just as there is around immigration policy. So with fiscal policy, you had this conversation in your last segment, right? The majority for Republicans in the House is very, very narrow. So if they want to extend the Tax Cuts and Jobs Act, they want to do more fiscal stimulus, which we think will probably eventually get done, they have a very slim margin to work with. And then with trade policy, we really need to understand, you know, how much of the tariffs that President-elect Trump has threatened are actually going to be implemented versus how much is a negotiating tool, right. So how much is transactional.
MAJOR GARRETT: And for mass deportations, how much do you fear that could affect the labor market in our country? That is to say, put upward pressure on prices, because if there is mass deportations and workplace inspections, lots of workers in agriculture, construction, meat processing and other vital industries could be pulled out of those sectors.
ADITYA BHAVE: So I think it’s our best case is that there will be a slowdown in the flow of immigrants, right? It’s harder to know what will actually happen around deportations. From an economic perspective, a worker is also a consumer, so there are some downside risks to economic activity. If there’s a large change in the population right, that’s just math. In terms of pressures in specific sectors, it’s really going to depend on how things play out. Yes, there could be labor shortages in certain sectors, but it’s very hard to know at this stage.
MAJOR GARRETT: Many CEOs I listen to say that they expect the tariffs and regulatory relief to kind of wash themselves out, meaning, essentially, you put them together, it’s benign on the US economy. Is that your perspective?
ADITYA BHAVE: I think that’s about right. If you look at the four key policy issues that we’ve been focused on, as I said earlier, trade, fiscal policy, immigration policy and deregulation, we think they’ll roughly wash out. But again, the starting point is pretty helpful, right? So we think that we can continue to grow at around two to two and a half percent this the coming year, as well as in 2026.
MAJOR GARRETT: So in reading year end summaries, the Economist, the Wall Street Journal and The Washington Post, all in their own way, warned that the stock market may be overvalued, may be too exuberant. Do you share any of those concerns?
ADITYA BHAVE: I’m not an equity analyst, so it’s hard for me to say, to give a specific number, our equity strategists do think that stocks can continue to run up to around 66-6700 by the end of this year. What you can say is that obviously there’s been a pretty aggressive run up in- in tech stocks, but it is not of the same scale that we saw in the late 90s. If we’re really worried about a similar bubble.
MAJOR GARRETT: What effect do you believe cryptocurrencies and artificial intelligence will play in the global economy 2025?
ADITYA BHAVE: So when it comes to AI, I think there’s two things to be said. The actual impact of AI adoption is probably going to show up pretty slowly in the data. So I don’t know that we’ll necessarily see that in 2025 or 2026, it might be a story for a few years down the line. But what has been really impactful already, and probably will be much more impactful in the coming years, is just laying the groundwork for AI, right? So if you see the increases in investment in data centers, and you think about what all that requires, right? It requires materials. It requires energy supply–
MAJOR GARRETT: –Right we need to, pardon me–
ADITYA BHAVE: –it requires labor, sure.
MAJOR GARRETT: I’m sorry to cut you off. We have a hard break we need to get to. Aditya Bhave from Bank of America, Happy New Year, and thank you so much for being with us. We’ll be right back in just a moment.
