{"id":7528,"date":"2019-08-26T14:57:54","date_gmt":"2019-08-26T18:57:54","guid":{"rendered":"https:\/\/www.zacksim.com\/?p=7528"},"modified":"2022-02-27T17:54:56","modified_gmt":"2022-02-27T17:54:56","slug":"global-recession-maybe-not-just-yet","status":"publish","type":"post","link":"https:\/\/zacksim.com\/financial-professionals-insights\/global-recession-maybe-not-just-yet\/","title":{"rendered":"Global Recession? Maybe Not Just Yet."},"content":{"rendered":"

For several weeks now, readers have been inundated with news stories about the escalating trade war, the inverted yield curve signaling recession, ongoing geopolitical unrest (Iran, Hong Kong), and volatile stock markets. These stories all warrant watching and clearly point in the direction of a global economic slowdown.<\/p>\n

But it\u2019s not all doom-and-gloom in the global economy<\/em>, and I\u2019d argue that the onslaught of negative news stories today is more indicative of a growing \u201cwall of worry\u201d versus a flashing red signal of a bear market and recession. In my view, a global economic recession is headed our way \u2013 just not this year.<\/p>\n

This week, I\u2019m going to cut through the noise and highlight some positive economic data and trends happening in the global economy right now. In my opinion, with most news reports overlooking anything remotely positive in the economy \u2013 and in some cases with positive data being outright ignored \u2013 it could actually be viewed as a bullish sign. When everything is negative, a gap starts to form between perception (that the situation is dire and will only get worse) and reality (the situation isn\u2019t actually as bad as many believe).<\/p>\n

When stock prices pull back on perception versus reality<\/em>, I think it\u2019s only a matter of time before reality sets back in and new highs are reached.<\/p>\n

The U.S. and Global Economy are Still Set to Grow in 2019<\/strong><\/p>\n

Let\u2019s start with the most important component of the U.S. economy \u2013 the consumer. <\/strong>Consumer spending accounts for more than 65% of our country\u2019s economic output.1<\/sup> So, when the U.S. consumer is strong, the U.S. economy tends to be strong too. Just last month, retail sales \u2013 which measures purchases in restaurants, stores, and online \u2013 posted strong month-over-month growth at 0.7% (circled in red below), which marks the strongest reading since March. In my view, a combination of low unemployment, low interest rates, and rising wages are resulting in confident consumers who are opening their checkbooks to shop.<\/p>\n

\"\"<\/p>\n

Source: U.S. Commerce Department2<\/sup><\/em><\/strong><\/p>\n

Strong retail numbers are good news for the economy. The Atlanta Fed recently adjusted its GDPNow forecasts higher <\/em>because of the retail-sales report, bumping it from 1.9% to 2.2%. Remember, too, that the U.S. economy grew a solid 2.1% in the second quarter even as business investment slowed and the trade war gained steam.3<\/sup> Growth in the 2% range is not the most inspiring and exciting kind of growth, but it also doesn\u2019t look much like a recession to me.<\/p>\n

Globally, the world actually saw a small increase <\/em>in the rate of economic expansion in July. I realize for many readers that the idea of additional, accelerating growth is hard to fathom given all the bad news and the downside volatility. But readings from the Global Composite Output Index \u2013 which measures activity in services and manufacturing \u2013 showed that output growth accelerated to a three-month high (51.7) thanks to solid activity in services. Readings above 50 indicate expansionary conditions.<\/p>\n

Manufacturing continues to weaken virtually across the board, which is concerning, but it\u2019s being outweighed by strength in services, which tends to matter more in developed economies anyway.<\/p>\n

Bottom Line for Investors<\/strong><\/p>\n

Much like the U.S. economy, on balance the global economy is expected to grow in the ~3% range in 2019. Most investors may not perceive <\/em>this type of growth to be possible given all the negative headlines and market volatility, but I think the economic reality <\/em>supported by hard data currently suggests more strength than many believe. As long as volatility and the negative perceptions of the global economy persist, I\u2019d argue that there remains a gap between perception and reality that equity prices are likely to fill. It\u2019s just a matter of time, in my view.<\/p>\n","protected":false},"excerpt":{"rendered":"

For several weeks now, readers have been inundated with news stories about the escalating trade war, the inverted yield curve […]<\/p>\n","protected":false},"author":3,"featured_media":4789,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-7528","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/7528","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/comments?post=7528"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/7528\/revisions"}],"predecessor-version":[{"id":8826,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/7528\/revisions\/8826"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/media?parent=7528"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/categories?post=7528"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/tags?post=7528"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}