Recession Conspiracy Theories Are All Wrong: Former Fed Chair

janet yellen

Former Fed Chair Janet Yellen is not convinced that the inverted yield curve is signaling a recession this time around, but fear won out. | Source: REUTERS/Jonathan Ernst

By While Jerome Powell remains in the hot seat, a former Fed Chair insists that things are not that bad from where she sits. Janet Yellen, who was in Powell’s spot from 2014-2018, visited Fox Business where she said that the inverted yield curve, which has everyone in a tizzy about a recession, could be wrong. Investors clearly weren’t listening, sending the Dow Jones to its worst performance year-to-date. Yellen stated:

“Historically it’s been a pretty good signal of recession, and I think that’s why markets pay attention to it. But I would really urge that on this occasion it may be a less good signal.”

Recession Fears Grip Investors

Nonetheless, fear of a recession gripped investors today, sending all three major indices sharply lower. As one of the worst performers in the S&P 500, Macy’s shed a whopping 13 percent of its value as a perfect storm of shoddy earnings results, a potential recession, and a U.S./China trade war sank the stock.

macy's chart
| Source: Yahoo Finance

Macy’s Faces a Perfect Storm, With or Without a Recession

Recession or not, Macy’s is struggling to remain relevant, particularly with the millennial generation. They have many other trendy shops to choose from, such as Lululemon, which incidentally is based in Canada and therefore a safer bet at the moment. Macy’s, which has been fiercely chopping its prices to no avail, also must contend with pure discount retailers such as TJMaxx, which are able to sell all of the clothing that Macy’s couldn’t offload in a firesale.

Macy’s already lowered its full-year earnings guidance, but according to a report in Bloomberg, that outlook has yet to include the worst of the tariff-effect with apparel makers poised to get hit among the hardest. If the tariffs hit as expected in mid-December, the bottom could fall out in Macy’s stock.

As for the inverted yield curve that investors are conditioned to equate with a recession, fear-selling is drowning out any other voices such as Yellen’s saying that things are not as bad as they seem. But as the stock market has proven recently, it can turn on a dime in response to the U.S. tweeter in chief.

Last modified: September 23, 2020 12:53 PM
Gerelyn is Assistant Editor at CCN. Based in the U.S., she has also covered institutional investing on Wall Street but caught the bitcoin bug soon after. She resides 13 miles outside of New York, close enough but also far enough away to escape it all. Follow her on Twitter or email [email protected]
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