Displaying items by tag: recession

Goldman raised the odds of a recession to over one-third in the next two years. The tightening cycle and rate hikes are causing waves in markets and the Fed could bump the Federal Funds Rate eight times this year. Overall economic health in the G10 helps mitigate the possibility of a recession, but it's still a possibility. Experts are saying that the Fed has a narrow path for a soft landing if they want inflation to come down to 2% and keep unemployment from rising. There are signs that the economy is beginning to weaken as consumer confidence is wavering. Still, the stock market doesn’t seem to pricing in a recession, however, the experts on Wallstreet and financial services are beginning to prepare.

Finsum: Look to the yield curve for recession predictions its the best sign and its beginning to warn investors.

Oil prices have started to recede but that could just be temporary as reserves flooding isn’t a permanent solution. While demand destruction is possible if oil remains elevated near $130 a barrel, international countries are feeling the pain. Developing economies in Latin America, Southeast Asia, and Africa are being pushed to the limits with energy cost burdens. That effect could trickle into the US. Latin America is already experiencing demand destruction. If oil prices climb and stay above $100 a barrel, energy costs could burden Americans and lead to a recession, but given the security on other energy fronts—unlike in Europe—the US is in a better position to weather the storm.

Finsum: Demand destruction driving a recession is unlikely in the US alone, but if international markets are hit heavily, globalization could cause trickle effects in America.

(New York)

There has been a quite a bit of consternation over the current labor market, and with good reason. Over a million people have applied for unemployment assistance ever week for over 4 months. All told, over 30 million people have lost their jobs. However, there is an encouraging trend: unlike in past recessions, there is still plenty of hiring going on. New job postings have not plunged the way they did in the past. In previous recessions, including after the Crisis, a lot of unemployment had to do with a combination of attrition and a lack of hiring-much more so than outright layoffs. However, that does not appear to be happening now as job postings are still holding strong at their 2015 levels.

FINSUM: This is an encouraging sign for the economy and for individual job seekers. There is still a chance that demand hollows out—especially if we have another full scale lockdown—but for now things look positive.

(Washington)

In a week that saw American COVID cases surge and claim one quarter of all the world’s 10m cases, the US health secretary said that the US may not be able to contain the virus. The US has recently seen a huge jump in cases, with only two states showing a weekly decline in cases. This has led to speculation that the virus may be completely uncontained in the country. Health secretary Alex Azar appeared to acknowledge this, and when discussing containing the virus, he said “The window is closing…”, and that the southern US was seeing the worst of the flare up.

FINSUM: All the hopes that warm weather would hurt the virus have been proven wrong—the hottest places in the country are having the worst outbreaks! How does one price the odds of another economic decline because of this surge?

(New York)

Markets have been rough for the last few weeks. Investors are doubting the pace of the recovery because of a big renewed rise in cases and the possibility of new lockdowns. And according to market analysts, signs are increasingly pointing to another meltdown. If you study various volatility indexes, starting with the VIX, it is becoming clearer that another big move lower is on the horizon. The VIX and other indexes have recently shot back higher after a steady fall after the huge March volatility and their momentum indicates investors may panic sell and create another big correction.

FINSUM: We do not give much respect to technical analysis on its own, but it is useful (in our opinion) as a tool to quantify what one is seeing in the real world. Right now, this makes sense given the rising worries about new cases and lockdowns.