The market has become extremely “head-line” driven lately. Primarily due to the China trade/tariff rhetoric. One day the president says we are “close to deal” and the market skyrockets, the next day he says “not so much” and the market collapses. The truth is, since the late July sell-off, the market (The Dow) has gone nowhere. It has been up one day and down the next, all in a 1000 point trading range.
Then, as usual, the “talking heads” on TV and some politicians are doing their best to scare us with their talk of a “looming” recession. The former Fed-Chair, Janet Yellen, recently stated that "no" we are not in a recession. However, a survey of 226 economists conducted from July 14 to Aug. 1, revealed that many of them believe we will be soon. Their best “guess” is sometime in 2021 (hmm, that would be after the election, go figure).
What is a recession?
A period of general economic decline defined usually as a contraction in the GDP for six months (two consecutive quarters) or longer, marked by high unemployment rates, stagnant wages, and a fall in retail sales. A recession generally does not last longer than one year to eighteen months. Historically, the market will turn downward prior to the realization of a recession.
As advisors our “number one” job is to remain vigilant to identify this situation as soon as possible, thereby quickly shifting to a defensive posture with the primary focus on minimizing account losses along with capital preservation.
Contrary to the “politicians” seeking their “15 minutes of fame” and the TV “talking heads” (selling air time), there is no current economic data to suggest a weakening economy. No technical data to suggest a long-term top developing. Considering the global rate environment, there is ample reason suggesting U.S. equities are likely to continue “to be the place to be” for good returns. There's enough of a backdrop to suggest stocks will eventually start moving higher again. For us here, it's more a matter of where the major averages will bottom (perhaps one more final sell-off) before finding new all-time highs again. We are watching, intently and will keep you posted.