Whether or not the U.S. economy is headed for a recession depends on who you ask. Wall Street firm Bank of America believes that the chances of a recession just went up. Meanwhile, economist Stephen Moore reportedly says that the economy is experiencing “short term pain for long-term gain,” according to Fox Business .
In the end, the reality probably lies somewhere in the middle, as the U.S. consumer continues to hold up an economy that is managing to grow in the low single digits. Investors are fleeing the stock market in the interim, sending all three major indices sharply lower once again. The Dow Jones, for instance, has spiraled almost 5 percent below its peak.
The stock market is currently subject to the whims of the president and could change course with a single unexpected tweet. The problem is that meanwhile, stocks hate uncertainty.
While the selling may have everything to do with the U.S./China trade war, that should provide some solace to investors. That’s because President Trump takes great pride in the performance of the stock market under his leadership, and he’s not likely to let things spiral so far out of control that he loses that edge. Remember this beauty?
Investors are no doubt waiting on pins and needles as the trade war continues to impact earnings projections for the current quarter, particularly in global economy-sensitive sectors such as energy, for instance, where estimates have come down some 20 percent, as reported by CNBC.
On Wall Street, Bank of America just rang the alarm on the likelihood of a recession. According to an analyst note cited in CNBC :
“Our official model has the probability of a recession over the next 12 months only pegged at about 20%, but our subjective call based on the slew of data and events leads us to believe it is closer to a 1-in-3 chance.”
If President Trump is going to make a move to ease the tariff tensions, he might not want to wait too much longer.