September 1, 2019
The latest media buzz word seems to be Recession. In a recession, gross domestic product contracts for at least two quarters. There are many more economic indicators that signal a recession. That's because GDP growth will usually slow for several quarters before it turns negative. This is typically in response to sluggish consumer demand. There have been 33 recessions since 1854.
The National Bureau of Economic Research defines a recession as "a period of falling economic activity spread across the economy, lasting more than a few months." The NBER is the private non-profit that announces when recessions start and stop. It is the national source for measuring the stages of the business cycle. The NBER uses the skill, judgment, and expertise of its commissioners to determine whether the country is in a recession. That way, it isn't boxed in by purely by the numbers. It can use monthly data to determine when a peak has occurred and when the economy has just started to decline. That allows it to be more precise and timelier in its measurements.
For the moment, the fundamentals show a strong economy with the lowest unemployment rate in 50 years, the lowest inflation rate in 50 years and consistent wage gains across the majority of middle-class America, who continue their spending at a consistent rate. The Federal Reserve’s monetary policy through the increase and decrease of Fed Funds interest rates is to maintain a Goldilocks economy- not too hot and not too cold, just right. So, depending on your political bias, one may root for a recession or booming economy just preceding an election year, but the Goldilocks economy is the goal of the Federal Reserve for the country.
Despite a volatile month in the markets, the Dow, S&P 500 and the NASDAQ are still all positive for the year at 13.19, 16.74, and 20.01percent respectively with the 10-year Treasury yielding 1.50 percent.
*Disclaimer: This report is a publication of Marchand Faries Financial Management, Inc. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgement of the author as of the date of publication and are subject to change.