In his latest column at The Washington Post Robert Samuelson muses over whether the stock market’s gyrations suggest that we are or soon will be in recession:
It’s hard not to wonder: Is the stock market telling us something? True, the market’s record in forecasting recessions is horrendous. Stocks often move according to whim or fad. But just because the market is wrong much of the time doesn’t mean it’s wrong all of the time. Could last week’s turbulent trading be one of the times it’s right? By Friday’s close, stocks had dropped 6 percent for the week, a paper loss of $1.5 trillion, says Wilshire Associates. Are we staring at the next recession?
The short answer to that is “no”. The stock market is responding nervously to the sell-off in the Chinese stock market which has been aggravated by the Chinese authorities’ policy responses.
The longer answer is that economic growth is slowing everywhere and, however connected or disconnected we are from the Chinese economy, a global downturn won’t be good for us, either. As I’ve posted previously, the World Bank has already forecasted slower growth for the US in 2016 than they had previously been predicting and I think that even that’s too rosy.
Besides, based on the NBER’s records the average time between contractions has been 5-6 years so we’re due. The last recovery was pretty darned phlegmatic, the Fed is ill-prepared for another downturn, and it’s pretty darned hard to be optimistic about the measures that Congress is likely to take in the event of another recession.
Look out below!
If the secular stagnation hypothesis is correct then we can expect little difference between boom and bust from hereon. Just continuing crapification of everything.
Ben Wolf for Optimist if the Year!
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Haven’t the last three recessions all been kicked off by financial crises?
And I can’t believe Schuler isn’t commenting on the two most important stories of the day: that Sean Penn’s head is about to be superglued to the shell of a desert tortoise, and that David Bowie died. These are apparently far bigger stories even than the NFL playoffs.
(Yes, Powerball lurks, but that will be the story of Wednesday.)
Well, I agree that Sean Penn may be in serious trouble if the Sinaloa cartel decides he ratted on El Chapo. I’m not interested in popular music. David Bowie, RIP.
The only hook I can come up with on the Bowie story is too disconnected. As it turns out a protege of mine (yes, I have proteges, don’t snicker) actually made it as a rock musician. He’s sort of a cult figure. He’s been compared with Bowie. Like I say pretty distant.