The Economy May Be Slowing, But Recession Fears Are ‘Overblown’ These Experts Argue - Forbes | Canada News Media
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The Economy May Be Slowing, But Recession Fears Are ‘Overblown’ These Experts Argue – Forbes

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2 years ago

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Despite the stock market taking a hit in recent months from growing recession fears, some experts still remain cautiously optimistic about the economy’s prospects, predicting that a downturn can be avoided if inflation continues to moderate and consumer spending remains resilient.

Key Facts

Investors have been facing recession warnings ever since the U.S. economy contracted by 1.4% in the first quarter of 2022 but the economic outlook isn’t as dire as it seems.

In fact, a majority of forecasters expect GDP growth of roughly between 2% and 3% in the current quarter, a solid rebound from the previous quarter.

Many experts are warning that the economy is heading for a hard landing as the Fed tries to combat inflation, but the economy is simply slowing rather than shrinking—and will therefore avoid a recession, argues LPL Financial chief economist Jeffrey Roach, who forecasts full-year GDP growth of 2.6%.

Beyond the “anomaly” in first-quarter GDP, the economy has “sufficient momentum” to offset inflationary pressures thanks to the stable U.S. consumer, with inflation likely to continue to moderate during the second half of the year, he says.

“The market bottoming process is often messy and volatile” and negative sentiment is “being overblown,” says Nationwide chief of investment research Mark Hackett, who argues that most economic data still reflects an “encouraging backdrop,” with corporate earnings, consumer spending and fund flows remaining resilient.

The ideal scenario for markets would be a soft landing—where the Fed is able to tame inflation without hurting economic growth—similar to 1994, when the central bank raised rates seven times in 13 months but avoided a recession, Sam Stovall, chief investment strategist for CFRA Research, told Forbes last week.

Key Background:

The U.S. economy grew 5.7% in 2021 after contracting by 3.4% in 2020, when pandemic lockdowns in March led to a brief recession. Since then, stocks have had one of their worst starts to a year on record as rising interest rates, surging inflation and the Russia-Ukraine conflict roiled markets and dented investor confidence. The Dow fell nearly 1% last week—its ninth down week out of the last ten, while the S&P 500 and Nasdaq both lost over 1% for their eighth negative week out of nine. Despite encouraging manufacturing and jobs data last week, investors sold shares on the news, with good news “again being treated as bad news because of the potential Federal Reserve implications,” says Hackett. “This is complicated by the notable shift in investor behavior from a ‘buy the dip’ mentality last year to a ‘sell the rally’ approach this year.”

What To Watch For:

“The growing threat of a global recession has raised serious concerns about the future sustainability of corporate profits,” according to a recent note from State Street Global Advisors chief investment strategist Michael Arone. What’s more, global supply shocks “show little signs of abating,” which could put corporate profits under “additional downward pressure.”

Further Reading:

How Does The Market Perform During An Economic Recession? You May Be Surprised (Forbes)

20 Stocks Experts Say Will Help Investors Beat A Bear Market (Forbes)

Experts See Fresh Opportunities In Chinese Stocks With Economic Activity Set To Rebound After Shanghai Reopening (Forbes)

Biden Meets With Fed Chair Powell, Says Fighting Inflation Is ‘Top Economic Priority’ (Forbes)

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Economy

S&P/TSX composite gains almost 100 points, U.S. stock markets also higher

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2 days ago

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September 13, 2024

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TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.

The S&P/TSX composite index closed up 93.51 points at 23,568.65.

In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.

The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.

The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.

The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.

This report by The Canadian Press was first published Sept. 13, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Economy

Statistics Canada reports wholesale sales higher in July

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3 days ago

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September 13, 2024

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OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.

The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.

The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.

The personal and household goods subsector fell 2.5 per cent to $12.1 billion.

In volume terms, overall wholesale sales rose 0.5 per cent in July.

Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.

This report by The Canadian Press was first published Sept. 13, 2024.

The Canadian Press. All rights reserved.

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Economy

S&P/TSX composite up more than 150 points, U.S. stock markets mixed

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4 days ago

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September 12, 2024

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TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 172.18 points at 23,383.35.

In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.

The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.

The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.

The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.

This report by The Canadian Press was first published Sept. 12, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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