Recession-Blind San Francisco Fed Chief Says No Downturn In Sight; Analysts Agree

November 6, 2019 13:41 UTC
  • San Francisco Federal Reserve chief says that a recession is not on the horizon.
  • Trader Peter Brandt shares her sentiment as he believes the S&P 500 has more muscle.
  • Other analysts also see the index climbing but only after a short-term pullback.

The unending trade war threats, the contracting manufacturing industry and the cutting of interest rates may signal the U.S. economy is showing signs of weakness. However, a high ranking Federal Reserve official says that a recession is not in sight.

In a CNN interview, San Francisco Federal Reserve president Mary Daly shows a lot of optimism about the economy. Her upbeat outlook comes in spite of the fact that the U.S. has entered its 125th month of economic expansion to mark the longest growth in history. Daly said:

Expansions don’t die of old age,

The expansion since 2009 is now the longest in American history. | Source: CNBC

When asked if the economy has more room for growth, the Fed chief responded,

I do think we have more muscle. I think we have more room to run.

Daly added,

The data are better than some of the mood on these things. Recession is not, in my judgment, right around the corner.

Daly is not alone in having a bullish stance on the economy and the stock market. Top market experts also have a rosy outlook.

Peter Brandt: The S&P 500 Has One More Leg Up

Fundamental threats such as the trade war might suck the euphoria out of the stock market as a lot of people are scared about the next recession. However, Peter Brandt believes that the S&P 500 has a nearly 20% upside potential. The widely-followed trader took to Twitter to share his bullish sentiment.

A bullish pattern breakout suggests a continuation of the uptrend. | Source: Twitter

Based on the chart, it appears that Brandt spotted an inverse head-and-shoulders breakout. The breakout suggests the resumption of the bullish trend. Brandt appears to be looking at 3,671.18 as the target of the pattern breakout.

In addition, the trader issued a stern warning to bears. He said that “the advance could be vicious.” Even if the breakout proves to be the last leg up, those who short the index at the wrong time could pay a heavy price.

Top Analysts Also Bullish on the S&P 500 but a Pullback Should Be Expected

We interviewed other analysts to see if they share Peter Brandt’s view and whether they think a recession is coming. Many of them agree with Brandt.

For instance, Wyckoff whiz and owner of the Wyckoff Stock Market Institute, Todd Butterfield, believes in the long-term potential of the S&P 500. But a correction is in order. The trader said,

I think it tops out right here and now…but [the S&P 500] only pulls back slightly for a few weeks before continuing still higher.

When asked about his target, Mr. Butterfield replied,

Probably [around] 3,300.

JM Vala, co-founder of LayupTrades, is also bullish on the index. He told CCN,

I believe the S&P can reach 3150-3250 by the end of the quarter, which is about 80-180 points higher. It’s very possible that we see a short term pullback first, but I’d see any move lower as an opportunity to get a better cost average and not a risk, so long as price holds above 3000.

Lastly, we asked economist and trader Alex Kruger if he also believes that the stock market has more upside potential. He replied,

Beyond the short-term, yes, I certainly do.

It appears that Mary Daly is right that expansions don’t die of old age. Market analysts continue to be bullish on the stock market and the U.S. economy. A recession might eventually hit the country but according to the Fed chief and a number of analysts it is likely that it won’t happen anytime soon.

Disclaimer: The above should not be considered trading advice from CCN.

This article was edited by Sam Bourgi.

@kirilnikk123

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has a bachelor's degree with a specialty in finance and lives in Canada. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. He owns Bitcoin, Ethereum, and other cryptocurrencies. He holds investment positions in the coins but does not engage in short-term or day-trading. Follow the author on Twitter @kirilnikk kirilnikk123@gmail.com