…It’s Predicting a Recession…
The stock market is only about 1% above year ago levels. Yet Trump loves to point to the stock market and say how great he’s doing. But actually, the stock market is isn’t doing all that well. And it’s flashing a big red danger sign. A recession is upon us.
The transportation Index is down 12% from year ago levels. And small companies aren’t doing well. The Russel index of small companies is down 14%. When you drill into the stock market sectors, the story is pretty ugly. Of fifteen sectors, over half are showing declines from year ago levels. Some of these declines are huge. Pharmaceutical, Energy, Retail Sectors are showing declines exceeding 20%. Declines in Biotech and Banks exceed 10%. The Industrial, Materials, and Financial sectors are also down.
Five of the seven sectors with gains, (Healthcare, Aerospace/Defense, Consumer Discretionary, Tech, and Telecommunication) have also been declining in the last five weeks.
The two Sectors (Consumer Staples and Utilizes) that are doing well, also point to an upcoming recession. People need to eat and keep the utilities on, even in a recession. So when investors flock to these sectors, it means investors are concerned.
If it wasn’t for the USA consumer on a spending spree, we would already be in a recession. Businesses have lost confidence and have reduced investments. Oversea countries, threatened and belittled by Trump, have also reduced buying USA products and services.
Even Trump is concerned. Trump needs the USA consumer to keep spending until after the 2020 election, or it’s all over for him. He ordered the Federal Reserve to reduce interest rates to “juice” domestic consumer spending. In addition, he ordered his financial advisors to come up with other ways to pump up the economy. But with the budget deficit at $1 trillion per year and interest rates at historical lows, finding ways to counter the recession will not be easy.
Trump hopes he does not have to address the real problem facing the USA. Businesses have lost confidence in Trump’s policies. And other countries hate Trump and are “boycotting” the USA.