RNRG - Weekly Market Pulse: Question Time
2024-05-13 12:20:00 ET
Summary
- While Japanese stocks have gotten a lot of press, it is Europe and EM stocks leading the international markets.
- In the US over the last three months, it is value stocks, including small and mid cap, that are outperforming.
- The dollar and interest rates have done absolutely nothing over the last six months.
Question Time
It’s question time again. I ask myself questions all the time about the economy and markets. I don’t have all the answers, but I think it’s important to know what you don’t know and be alert when the markets or the economy offer answers. There’s a lot to think about today so let’s get started:
- When will the next recession arrive? The answer, of course, is that we don’t know. We never know because there are no reliable indicators that can tell us what the future economy will look like. I know no one wants to say “it’s different this time” but it actually is different – every time. The economy, especially the US economy, is not a stagnant thing that just repeats the past in some infinite loop. The only constant is change. So where are we today? Well, I think we can all agree that we aren’t in recession right this moment. We just completed the first quarter of 2024 and the US economy grew by 1.6%, which was somewhat less than expected but still a pretty positive start to the year. Since the start of the second quarter we have had some weak reports, such as the ISM manufacturing and services reports, which are both below 50 (indicating contraction), but overall the economy continues to surprise to the upside. The current Atlanta Fed GDPNow estimate for Q2 is +4.2%, the 3-month average of the CFNAI (Chicago Fed National Activity Index) is -0.19 which indicates growth slightly below trend, the Weekly Economic Index is 1.74 and steady, credit spreads are near their lows for this cycle, and the yield curve has steepened over the last three months. None of those is pointing to recession right now.