The following is an interview with Bank of America’s Chief Economist Aditya Bhave on ‘Face the Nation with Margaret Brennan’ broadcast on December 29, 2024.
KEY GARRETT: Now we’ll look at the economy and what to expect in 2025. We’re joined by Bank of America Chief Economist Aditya Bhave. Aditya, good morning. nice to meet you I’ve covered a lot about presidential transitions. Outgoing presidents are always assessing what kind of economy they will provide for their successors. It’s a political conversation. Objectively, what kind of economy is the incoming Trump administration inheriting?
ADITYA BHAVE, CHIEF ECONOMIST, BANK OF AMERICA: Hello. Thank you for having me. So we think the economy has very solid momentum going into next year as well. For example, if you look at our internal card data, you’ll see a significant increase in spending around the holidays. You can also look at TSA data on airport traffic, which is also very strong during the holiday season. You can also think about things through a broader lens. Starting in 2022, GDP grew by only 1%, CPI inflation peaked at 9%, and all the talk at the time was stagflation. When will a recession arrive and why are workers quietly quitting? And look what happened over the next two years. This was completely unexpected and very pleasant. 3% GDP growth, falling inflation, rising labor productivity. So all the positives that make us optimistic are that we can continue to grow above 2% next year, albeit with somewhat sticky inflation.
Major Garrett: Is there a greater X factor than the scale and scope of mass deportations promised by the Trump administration in 2025?
ADITYA BHAVE: I think the two biggest issues really from a market perspective are going to be fiscal policy and trade policy. As with immigration policy, there are many uncertainties about these policies. We had this conversation at the end about fiscal policy. Right? The Republican majority in the House is very, very narrow. So if they want to extend the Tax Cuts and Jobs Act and do more fiscal stimulus, I think it will get done eventually, but there is very little room for cooperation. And when it comes to trade policy, we need to understand how many of the tariffs President-elect Trump has threatened will actually be implemented and how many of them are negotiating tools. How much is the transaction amount?
MAJOR GARRETT: How much impact do you think mass deportations could have on our country’s labor market? That means putting upward pressure on prices in agriculture, construction, meat processing and other essential industries because large numbers of workers could be pulled out of those sectors if mass deportations and workplace inspections take place.
ADITYA BHAVE: So I think the best case would be for the immigration flow to slow down. Right? It’s harder to know what will actually happen when it comes to deportation. From an economic perspective, workers are also consumers, so there are some downside risks to economic activity. If there’s a big change in population, it’s just math. It will depend on how things progress in terms of pressures in specific sectors. Yes, there may be a staffing shortage in certain areas, but it is very difficult to know at this stage.
MAJOR GARRETT: Many of the CEOs I hear from are hopeful that tariffs and deregulation will go away on their own to some extent. So essentially, putting these two together has a positive effect on the U.S. economy. Is that your view?
ADITYA BHAVE: I think that’s almost right. As I said earlier, if you look at the four key policy issues we’ve focused on – trade, fiscal policy, immigration policy, and deregulation – I think they’ll roughly disappear. But again, a starting point is quite helpful. Right? So, we think we can continue to grow around 2-2.5% not only in 2026 but also next year.
MAJOR GARRETT: So, as you read the year-end summaries of The Economist, the Wall Street Journal, the Washington Post, etc., they are warning in their own way that the stock market may be overvalued and overly exuberant. Do you share those concerns?
ADITYA BHAVE: It’s hard for me to give you specific numbers because I’m not a stock analyst. Our stock strategists think the stock could continue to rise to 66-6700 by the end of this year. What I can say is that there has certainly been a fairly aggressive rise in tech stocks, but not on the same scale as we saw in the late ’90s. If you are really worried about similar bubbles.
MAJOR GARRETT: What impact do you think cryptocurrencies and artificial intelligence will have on the global economy in 2025?
ADITYA BHAVE: I think I can say two things about AI. The real impact of AI adoption will probably show up in the data quite slowly. So I don’t know if we’ll necessarily see that in 2025 or 2026. That might be a story in a few years. But what has already had a real impact and will have an even bigger impact in the coming years is laying the foundation for AI. Right? So why not look at the growing investment in data centers and think about what is needed? You need ingredients. Energy supply is required.
MAJOR GARRETT: -That’s right. I’m sorry, but-
ADITYA BHAVE: -Of course you need labor.
MAJOR GARRETT: Sorry to interrupt you. We have a tough break to go. Aditya Bhave of Bank of America, Happy New Year! Thank you so much for joining us. I’ll be back in a moment.
