The next recession now appears further away, thanks to Trump, economist says

Recession risk has declined and the economy's current expansion period will last at least a year longer than was forecast before the U.S. election, according to a new Deutsche Bank analysis of a survey by the Federal Reserve Bank of New York .

The results of the primary dealer survey, which polls banks and securities brokers on their economic, monetary policy and financial market expectations in advance of Federal Reserve meetings, showed that primary dealers (a list that includes firms like Bank of America, Citigroup, Barclays, Nomura Securities and RBC Capital Markets) forecast an increase in the number of months before the federal funds rate returned to 0 percent.

Deutsche Bank's chief international economist, Torsten Slok, concluded this showed the election of Donald Trump effectively reduced recession risk in the near term and extended the economy's expansion period.

The Fed's targeted short-term rate returning to 0 percent would imply a recession, as interest rates are reduced by central banks in times of economic weakness to provide a boost to the economy.

Seven months before the U.S. election the expectation was that the economy would experience a recession within 11 months; the current expectation from market participants is 27, according to Slok's analysis of the survey.

"So using those numbers we made some very simple assumptions and came to the conclusion that the market at the moment sees that we are at least two years away from the next recession, and this is very important because before the election with Donald Trump, the market was saying that we were about a year away, and the fact that we have pushed that out so much is certainly a very strong indicator that we are away from a recession quite a bit here," Slok said Friday on CNBC's "Trading Nation."

The bullish sentiments from Wall Street dealers come as the market appeared to react negatively Monday morning after a deluge of weekend news about President Trump's executive order to impose an immigration ban. In morning trading, the Dow Jones industrial average, Nasdaq and S&P 500 experienced their biggest drops in months.

Yet to Slok, the optimism about the economy also implies that the market's gains since Trump's election could continue.

Slok said a number of his inflation outlook models "continue to suggest that inflation is well-contained and the Fed does still have things under control, so that's why the dovish Fed, if you will, or the two, three hikes this year continue to be a bull scenario for equities."


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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