{"id":8068,"date":"2019-06-19T18:44:28","date_gmt":"2019-06-19T18:44:28","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=8068"},"modified":"2022-02-26T13:07:16","modified_gmt":"2022-02-26T13:07:16","slug":"economic-data-suggests-slowing-growth-possible-recession","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/economic-data-suggests-slowing-growth-possible-recession\/","title":{"rendered":"Economic data suggests slowing growth, possible recession"},"content":{"rendered":"\n<p>According to the National Bureau of Economic Research (NBER),\nthe U.S. economy has been growing for over ten years \u2013 putting it on the level\nwith the longest expansion period in U.S. history, from March 1991 to March\n2001. By the NBER\u2019s measure, just one more month of growth would make this the\nlongest expansion cycle in our country\u2019s history.<sup>1<\/sup> <\/p>\n\n\n\n<p>Expansions don\u2019t die of old age, so this historical\nmilestone does not by itself imply that the U.S. is headed for a recession\nsoon. But there\u2019s some recent economic data that seems to be implying a real growth\ndeceleration, with cracks forming in the economy that have some Fed officials\nvoicing concern. <\/p>\n\n\n\n<p>________________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_6_16&amp;content=stock_market_outlook_report \">As the Bull Ages, Base Your Investing Decisions on Hard Data<\/a><\/strong><\/p>\n\n\n\n<p>Trying to time a recession, in my view, is not the best\noption. Instead, I recommend planning for the long-term. When preparing your\ninvestments for a potential recession, it is important to keep an eye on key\neconomic indicators. To help you do this, we are offering all readers\na look into our just-released <strong>July 2019\nStock Market Outlook report.<\/strong><strong> <\/strong><\/p>\n\n\n\n<p>This\n22-page report contains some of our key forecasts to consider such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Inside the China tariff war<\/em><\/li><li><em>Why are Zacks strategists (including me) staying\nbullish?<\/em><\/li><li><em>Stock market returns expectations for 2019 <\/em><\/li><li><em>Small-cap and large-cap outlook in 2019<\/em><\/li><li><em>What of cuts in global growth?<\/em><\/li><li><em>What produces 2019 Optimism?&nbsp; <\/em><\/li><li><em>And much more.<\/em><\/li><\/ul>\n\n\n\n<p>If you\nhave $500,000 or more to invest and want to learn more about these forecasts,\nclick on the link below to get your free report today!<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_6_16&amp;content=stock_market_outlook_report \">IT&#8217;S FREE. Download the Just-Released July 2019 Stock Market Outlook<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2019_6_16&amp;content=stock_market_outlook_report \">2<\/a> <\/sup><\/strong><\/p>\n\n\n\n<p>________________________________________________________________________<\/p>\n\n\n\n<p>Below is a detailed look at recession indicators you should\nkeep an eye on:<\/p>\n\n\n\n<p><strong>1) The Yield Curve:<\/strong>\nLet\u2019s start with the yield curve, which has historically been a reliable\nindicator of expansions and recessions. Vice Chair of the Federal Reserve\nBoard, Richard Clarida, made the point clear when he stated that \u201cI think\nhistorically a flat yield curve doesn\u2019t convey a lot of information. If the\nyield curve inverts as it has\u2026and if it persists for some time, that\u2019s\nobviously something I [Clarida] would definitely take seriously.\u201d<\/p>\n\n\n\n<p>When looking at the difference between the 10-year U.S.\nTreasury and the 3-month T-bill, the yield curve is officially inverted:<sup>3<\/sup>\n<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2019-06-16-MOTM-Image-1-of-2-1024x412.png\" alt=\"\" class=\"wp-image-8069\"\/><\/figure>\n\n\n\n<p><strong><em>Source: Federal Reserve Bank of St. Louis<\/em><\/strong><\/p>\n\n\n\n<p>We\u2019ll be watching to see if the yield curve stays inverted\nmoving forward. But it\u2019s worth noting that interest rates have been subject to a\n$4 trillion balance sheet expansion by the Fed as well as extraordinary\nmonetary policies that have kept interest rates artificially low for some time.\nFor these reasons, it\u2019s debatable whether the yield curve indicator may be as\nreliable in forecasting a recession as in times past (see chart below).\nRegardless, we\u2019ll need to see if the yield curve remains consistently inverted\nfor some time, and reassess in a few months.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2019-06-16-MOTM-Image-2-of-2-1024x412.png\" alt=\"\" class=\"wp-image-8070\"\/><\/figure>\n\n\n\n<p><strong><em>Source: Federal Reserve Bank of St. Louis<sup>4<\/sup><\/em><\/strong><\/p>\n\n\n\n<p><strong>2) The Labor Market<\/strong>:\nAnother indicator to watch closely is the labor market, which some could argue\nhas already reached a peak in its ability to create new job growth. The U.S.\nDepartment of Labor\u2019s May employment report showed far weaker job growth than\nexpected, with 75,000 new nonfarm jobs added versus the 175K\u2013180K expected.<sup>5<\/sup>\nKeen observers would also note that with downward revisions to March and April\nreadings, the net change for May was essentially flat. The economy\u2019s ability to\ncreate new jobs or fill existing openings is a key tenet for growth.<\/p>\n\n\n\n<p><strong>3) Transportation:<\/strong>\nTransportation is another area where signs of weakness are starting to show in\nthe data. The movement of goods across the country by freight or rail is often\na good measure of economic activity at-large, and by some measures that\nactivity has turned negative in recent months. One such measure, the Cass\nFreight Index, measures volume and velocity of goods moving across the United\nStates, and its April report showed <em>negative\n<\/em>year-over-year activity over the last five months.<sup>6<\/sup> <\/p>\n\n\n\n<p>On balance, we have an economic expansion that is near\nbecoming the longest in U.S. history, and we have economic data showing that the\nexpansion may be losing its legs &#8211; not to mention an ongoing trade war between\nthe U.S. and the world\u2019s second largest economy, China. Even if one cannot make\nthe case for a recession in 2019 or soon, it\u2019s at least apparent that the road\nto accelerating economic growth is uphill (and fairly steep). <\/p>\n\n\n\n<p><strong>Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n<p>The Fed\u2019s actions later this month and in July will almost\ncertainly matter to markets, and investors should continue to monitor economic\ndata carefully.<\/p>\n\n\n\n<p>But at the end of the day, investors should also remember\nthat the stock market is arguably the most reliable leading indicator for recessions,\noften peaking well before the U.S. economy does. By a similar token, the stock\nmarket will often begin its recovery a few months before the U.S. economy\nstarts growing again. <\/p>\n\n\n\n<p>Trying to time these peaks and troughs is extraordinarily\ndifficult, as the windows for getting it right are small relative to most\ninvestor\u2019s time horizons. Over the last 65 years, the U.S. has been in a\nrecession in less than 15% of all months, and in some of those cases equity\nreturns were positive even over the full length of the contraction (again,\nsince stock market recoveries often start before economic recoveries do). Trying\nto time the recession perfectly is certainly an option, it just might not be a\nwise one. <\/p>\n\n\n\n<p>Instead, I recommend staying focused on the long-term and on\nkey economic indicators. To help you do this, I invite you to <strong>download our Just-Released July 2019\nStock Market Outlook Report.<\/strong><br>\n<br>\nThis Special Report is packed with our\nnewly revised predictions for 2019. For example, you&#8217;ll discover Zacks\u2019 view\non:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Inside the China tariff war<\/em><\/li><li><em>Why are Zacks strategists (including me) staying\nbullish?<\/em><\/li><li><em>Stock market returns expectations for 2019 <\/em><\/li><li><em>Small-cap and large-cap outlook in 2019<\/em><\/li><li><em>What of cuts in global growth?<\/em><\/li><li><em>What produces 2019 Optimism?&nbsp; <\/em><\/li><li><em>And much more.<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest, learn how you may be able to prepare your portfolio for changes in the economy by reading this new report today.<strong><sup>7<\/sup> <\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Recession indicators point to end of 10-year economic expansion <\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-8068","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8068","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8068"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8068\/revisions"}],"predecessor-version":[{"id":10750,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8068\/revisions\/10750"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8068"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8068"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8068"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}