Please ensure Javascript is enabled for purposes of website accessibility
Yes, Stocks Are Up Again. No, Recession Worries Aren’t Gone
gvw_ap_news
By Associated Press
Published 5 years ago on
September 14, 2019

Share

NEW YORK — The U.S. economy is sending some worrying signals about a possible recession, yet the stock market has gone on a what-me-worry ride toward record heights.
What gives?
Put simply, while the stock market watches the economy, the two don’t always move in lockstep. If investors see that companies are still bringing in profits, and stocks don’t appear too expensive, they’ll risk an investment even if the economy hasn’t gotten an all-clear on the recession watch.
This week, the S&P 500 and Dow Jones Industrial Average climbed back to within 1% of their record highs set in July. A big reason is the recent easing of tensions in the U.S.-China trade war ahead of talks scheduled for next month, potentially diminishing the threat to the profits of U.S. companies. In addition, the Federal Reserve is expected to again cut interest rates. Lower rates make bonds less attractive investments and can, in turn, make investors more willing to sink their money into stocks.
Encouraging data on shopping trends and the job market also buoyed investors’ mood.
Still, there is plenty to be concerned about. Investors know tensions in the trade war can easily escalate up again with another presidential tweet storm, as they painfully saw last month when stocks tumbled nearly 6%. Manufacturing is still weak worldwide. And the bond market has sent a signal that has been a fairly good predictor of recessions in the past.
Wall Street isn’t exactly ignoring those signals — there’s a fierce debate among analysts over whether a recession is coming to end what’s become the longest U.S. economic expansion on record.
But history shows that stocks can keep rising until a few months before a recession officially starts, as they did until October 2007, two months before the Great Recession swamped the economy — and the stock market.

Clouding the Outlook Is President Donald Trump’s Trade War

“The recessionary signals are still flashing yellow at this point,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management. She pointed in particular to how three-month interest rates for Treasury bonds are still higher than for 10-year Treasurys, a relatively rare occurrence that has preceded past recessions.
Roland talks often with financial advisers who manage money for clients, and the advisers are generally still optimistic about markets going higher. Their clients, though, are typically much more negative.
S&P 500 index funds have returned more than 20% this year, and the largest bond mutual fund has returned nearly 8% — yet many of those clients think they’ve lost money this year, Roland said.
The clients can be forgiven for the confusion, given how volatile the market has been over the last year. After diving nearly 20% in late 2018, the S&P 500 charged out to its best start to a year in decades, only to jerk down, up, down and back up again since May as worries about the trade war intensified.
Economists generally are forecasting slower growth ahead, but few are calling for an outright recession, which would be the first since the 2007-09 Great Recession.
On the encouraging side for the economy is the continued growth in the job market. Employers continue to hire workers, though the pace has been slowing, and wages are rising. That means more shoppers have money to spend. The latest sign of that came from a report Friday that showed U.S. retail sales rose moderately last month, boosted by brisk sales of cars and SUVs.
But clouding the outlook is President Donald Trump’s trade war. It has already helped cause the first monthly contraction in U.S. manufacturing in three years. The larger fear is that all the uncertainty about trade will push businesses and households to get more cautious and pull back on their spending.
That could lead to lower profits for companies, triggering a downward cycle where businesses pull back on hiring, which in turn causes yet more cutbacks in spending.

DON'T MISS

The Pickle Flavor Frenzy and Its Rise in Food Trends

DON'T MISS

Kate Hudson Had a Lifetime to Make a Record. The Result is ‘Glorious,’ Out in May

DON'T MISS

Long-Lost First Model of USS Enterprise from ‘Star Trek’ Boldly Goes Home

DON'T MISS

California Leaders Take Sides in Monumental Supreme Court Case on Homelessness

DON'T MISS

Man Sets Himself on Fire Outside Trump Hush Money Trial Court

DON'T MISS

McDonald’s Ice Cream Machines Are So Unreliable They’re a Meme. They Might Also Be a Climate Solution.

DON'T MISS

Real Estate Experts Talk Fresno’s Economic Future. Are Tough Times Ahead?

DON'T MISS

Unlocking the Secrets to Fresno State’s Superb Baseball Season

DON'T MISS

‘This Is How to Improve Reading Proficiency. We Just Have To Execute It’: FUSD Board President

DON'T MISS

Does Dyer Support (or Endorse) Bredefeld for Supervisor?

UP NEXT

Long-Lost First Model of USS Enterprise from ‘Star Trek’ Boldly Goes Home

UP NEXT

Man Sets Himself on Fire Outside Trump Hush Money Trial Court

UP NEXT

Rare House Vote Sees Ukraine, Israel Aid Advance as Democrats Join Republicans

UP NEXT

Full Jury and 6 Alternates Seated in Trump’s Hush Money Trial

UP NEXT

Barbara Corcoran: 1% Interest Rate Drop Will Send Housing Prices ‘Through the Roof’

UP NEXT

Juror Dismissed From Trump Hush Money Trial. Prosecutors Seek to Hold Former President in Contempt

UP NEXT

Biden Backs House’s Aid Package for Ukraine, Israel While Speaker Johnson Battles to Retain Position

UP NEXT

Myanmar’s Ousted Leader Suu Kyi Moved From Prison to House Arrest Due to Heat, Military Says

UP NEXT

NPR Editor Suspended Over Claims of Network’s ‘Progressive Worldview’

UP NEXT

Wall Street’s Mixed Trading Day

California Leaders Take Sides in Monumental Supreme Court Case on Homelessness

22 hours ago

Man Sets Himself on Fire Outside Trump Hush Money Trial Court

1 day ago

McDonald’s Ice Cream Machines Are So Unreliable They’re a Meme. They Might Also Be a Climate Solution.

1 day ago

Real Estate Experts Talk Fresno’s Economic Future. Are Tough Times Ahead?

1 day ago

Unlocking the Secrets to Fresno State’s Superb Baseball Season

1 day ago

‘This Is How to Improve Reading Proficiency. We Just Have To Execute It’: FUSD Board President

1 day ago

Does Dyer Support (or Endorse) Bredefeld for Supervisor?

2 days ago

Get a 3D First Look at Merced’s High-Speed Rail Station Design

2 days ago

California Court to Decide on Transgender Ballot Measure Wording

2 days ago

Rare House Vote Sees Ukraine, Israel Aid Advance as Democrats Join Republicans

2 days ago

The Pickle Flavor Frenzy and Its Rise in Food Trends

You might have noticed that the tangy taste of pickles has taken over more than just the condiment aisle. From pickle-flavored popcorn to pi...

21 hours ago

21 hours ago

The Pickle Flavor Frenzy and Its Rise in Food Trends

21 hours ago

Kate Hudson Had a Lifetime to Make a Record. The Result is ‘Glorious,’ Out in May

21 hours ago

Long-Lost First Model of USS Enterprise from ‘Star Trek’ Boldly Goes Home

22 hours ago

California Leaders Take Sides in Monumental Supreme Court Case on Homelessness

1 day ago

Man Sets Himself on Fire Outside Trump Hush Money Trial Court

1 day ago

McDonald’s Ice Cream Machines Are So Unreliable They’re a Meme. They Might Also Be a Climate Solution.

1 day ago

Real Estate Experts Talk Fresno’s Economic Future. Are Tough Times Ahead?

1 day ago

Unlocking the Secrets to Fresno State’s Superb Baseball Season

MENU

CONNECT WITH US

Search

Send this to a friend