Thursday, 13 September 2018

Low unemployment and high corporate debt may be red flags for US economy

The S&P 500 finished little-changed on Wednesday, continuing its stabilisation this week after falling 1 percent last week.

JJ Kinahan, chief market strategist at TD Ameritrade, said that the recent selling had followed “a remarkable year and a half” but “I don’t see a tone change in the market; the numbers continue to point to a strong economy”.

Still, other analysts think the US economy is at risk of a recession.

Clarity Financial analyst Jesse Colombo wrote in a Forbes column that the US unemployment rate has fallen below 4 percent. Colombo wrote that historically, “when the U.S. unemployment rate falls under 4%, recessions follow soon after”.

Meanwhile, Steve Blitz, chief US economist at TS Lombard, thinks that the high debt levels of US corporations is a red flag. It leaves them vulnerable “if the equity market comes down a lot”.

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