Tuesday, 20 August 2019

Markets rise but US recession widely expected by 2021

Markets rose on Monday.

The S&P 500 rose 1.2 percent, its second consecutive gain of more than 1 percent. Elsewhere, the STOXX Europe 600 rose 1.1 percent and the Nikkei 225 rose 0.7 percent.

However, the rally may not last.

“The market is preparing for a bad outcome,” Mike Wilson, chief US equity strategist at Morgan Stanley, told MarketWatch in an interview.

“The hope of Fed cuts has been propping up the markets all year, but rate cuts aren’t good for the market if you’re going into recession,” said Wilson.

While some economists think that the US consumer could prop up the economy, Wilson noted that the University of Michigan’s consumer sentiment index fell 6.3 points in August and weekly hours worked has fallen to near two-year lows.

Also, the trade war between the US and China is likely to weigh down the economy as “the likelihood of a deal has gone down dramatically”.

Indeed, many other economists think that the US economy may be entering recession within the next few years.

According to a survey by the National Association for Business Economics, 2 percent of economists surveyed expect a recession to begin this year, 38 percent expect a recession next year and 34 percent expect one in 2021.

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