By Selina Stoller, Summit Consumer Receivables Acquisitions, LLC ***
The U.S. saw a shift towards a more stable, less cyclical economy in March.
U.S. stocks are holding steady despite what many experts see as a reliable (but not immediate) recession signal. The end of March showed a so-called inversion in the yield curve – which means very short rates rose above longer 10-year note rates. The bond market doubled down on scary winnings after signaling both a potential recession and that the Fed could have to cut interest rates this year to stop it.
There seems to be a fairly dramatic disconnect between stocks and bonds. The Dow traded as much as 100 points on both sides towards the close of March, and ended up 16 at 25,516, while the S&P 500 fell 2 points to 2,798.
Experts believe some of the moves in the market are more technical signals and “short squeezes” rather than real fear about a recession.
In actuality, the S&P 500 is up 13 percent and having its best first quarter in 21 years. The market rebounded from loss and volatility suffered at the end of 2018 by building up a nice 12 percent lead so far in 2019.
The first couple of months were supercharged “January effect” where the smallest, riskiest, most aggressive stocks sped higher as the fourth-quarter growth panic, fund liquidations, and tax-loss selling subsided. Historically, very strong first quarters tend to continue higher through a least a bit of the year.
The Fed also released a new forecast for no rate hikes this year. This 180 degree turn from their previous stance has since calmed many investors’ and consumers’ concerns.
Many economic naysayers have been warning of a recession for months, with no hard evidence while the market continues to surpass expectations.
The overall 3.1 percent Q4-to-Q4 growth rate in 2018 means the U.S. just had its strongest calendar year of economic growth since 2005. Consumer spending is driving growth; unfriendly regulations have been reined in; and business investment is strong. All of these things are laying the groundwork for future economic growth – not a recession.
- 5 Apr, 2019
- Josh Smith