In a new report, Bank of America analyst Ethan Harris discussed the recent market action in response to China and looked at the probability that the S&P 500’s decline is indicative of a recession on the horizon in the United States.
Despite a relatively high score on the firm’s recession probability indicator, Harris urges traders not to panic about the possibility of a recession.
Rate Hike Coming
Despite the injection of fear into the markets during the past week, Harris does not believe that the FOMC will allow stock market turbulence to influence its decision to raise rates on September 17. The latest employment numbers indicate a very strong labor market, and the FOMC has been emphasizing a strong jobs market as the key to its eventual target of 2 percent inflation.
In addition, the U.S. GDP growth rate of 3.7 percent in Q2, as well as Bank of America’s projected 2.8 percent Q3 GDP growth rate, indicates that the underlying U.S. economy is strong, regardless of the movement of the recent shakiness of the S&P 500.
Not Completely Disconnected
Although there is no direct link between equity market movement and underlying economic strength, there are…
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