The U.S. economy remains in good shape with steady, if unspectacular, growth, the head of one of the world’s largest investment management companies said at the opening of the general session at ULI’s 2016 Spring Meeting in Philadelphia.

“The health of the investment industry and the markets is really good right now,” said F. William McNabb III, chairman and chief executive officer of Vanguard, a Valley Forge, Pennsylvania–based global firm that manages $3.5 trillion in investor assets.

McNabb dismissed the gloomy portrayal of the nation’s economic health in the current presidential campaign and expressed skepticism about some candidates’ promises that their policy proposals would accelerate economic growth from its present rate of about 2 percent to 5 percent or more.

“We’re relatively sanguine,” said McNabb. “We don’t see a lot of recessionary signals. In fact, we’re seeing the opposite.” Vanguard’s forecasts show “continued muted growth” for at least the next six months to a year, he said.

The employment rate has improved enough that the first signs of wage inflation are starting to appear, McNabb said. “It’s actually getting hard to hire people,” he noted. “We’re feeling that as a company.”

Economic growth is slower than in past recoveries because of reduced borrowing; it’s not a matter of tight money, but rather of caution, he said.

Unlike the last rebound, “this recovery is very unlevered,” McNabb said. “Consumers have been slow to add leverage to their balance sheets” and instead have focused on paying down existing debt. He estimated that the caution about amassing too much debt—a psychological effect of the 2008 downturn—probably has slowed growth in the gross domestic product by 0.5 to 0.75 percent.

At right, F. William McNabb III, chairman and chief executive officer of Vanguard, speaking with William J. Ferguson, Chairman and CEO of Ferguson Partners Ltd., at the ULI Spring Meeting in Philadelphia.

At right, F. William McNabb III, chairman and chief executive officer of Vanguard, speaking with William J. Ferguson, chairman and CEO of Ferguson Partners Ltd., at the 2016 ULI Spring Meeting in Philadelphia.

But in contrast with the aftermath of the downturn, the money for credit is now available if consumers decide to use it. “We’ve begun to see the mortgage market open up in the past 12 months,” McNabb said. “Consumer credit cards are still available, with more guardrails from users.”

McNabb also said more-stringent regulations put in place after the downturn, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act passed by Congress and signed into law by President Obama in 2010, have slowed growth. But there is a positive tradeoff: “The market is now safer,” he said.

McNabb disputed predictions by some analysts that the growing number of baby boom retirees tapping into their retirement portfolios would lead to a downturn in stock prices. With that generation’s increasing longevity, some members will need to rely on their savings for several decades, he said.

“The only way to make [retirement savings] last is to continue to invest in assets that produce,” he said. “They’re going to continue to invest in equities.”

The investment industry needs to pay more attention to developing new products to serve those retirees, McNabb said.

McNabb joined Vanguard in 1986 and became chief executive in 2008, on the eve of the Wall Street financial meltdown. “I often tease my predecessor, Jack Brennan, that he was the best market timer in history,” he said.

Unlike some other financial giants, McNabb and the rest of Vanguard’s leadership decided not to lay off staff during the crisis because they thought it was imperative to maintain the same level of service to maintain clients’ confidence. “A lot of people thought that it would be the end of western capitalism, but we thought we could get out on the other side,” he explained. “We told our people, ‘Focus all your energy on the client. Nothing else matters. We’ll worry about the financial side.’”

It was a bet that paid off. Vanguard, which essentially had invented the modern mutual fund marketplace in the mid-1970s, not only survived, but grabbed an even bigger share of the investor market. Since 2009, roughly one of every two dollars invested in mutual funds has gone to Vanguard, McNabb said.

McNabb predicted that investors’ returns on stock investments will be somewhat lower over the next decade, with inflation-adjusted returns in the 3.5 to 5 percent range. The reason is that so many companies already have high valuations, he said.

But investors will stay in the equities market, he said, because returns from cash and bonds will be lower as well.

McNabb’s greatest concern now is cybersecurity in the financial industry, he said. The threat has evolved in recent years from mischievous vandals to criminal gangs, and now to nations that might wage cyber warfare, he said. “They’re not so much interested in your money, but maybe in disrupting the system,” he said.

The financial industry has become much more vulnerable, he noted, because of increased reliance on online portals. About 98 percent of Vanguard’s investor transactions now take place online. On the plus side, he said competing financial services companies are now joining together to share information about attacks and to create a warning system to bolster their collective defenses. Federal agencies also have formed a task force to fight the problem more aggressively.

McNabb urged consumers to use two-factor authentication, a system in which an online transaction must be authenticated with a code that the financial services company sends via a second channel, such as a phone text message.

“From a security standpoint, it’s the single biggest thing you can do to prevent hacking in the financial space,” he said. “I would sign up for it. You’ll get even better technology over the next ten years, but this is as good as it gets right now.”