The stock market and the U.S. economy is off to a bumpy start in 2016, sparking fears that the U.S. will soon fall into its first recession since the Financial Crisis. However, financial markets are often driven more by emotion than reason. Is the U.S. actually on the precipice of a recession, or are markets overreacting?
It’s hard to argue with slowing U.S. economic growth, which dropped to an annualized rate of 0.7 percent in the last quarter of 2015. But while job growth contracted to only 151,000 in the month of January, growth is still growth.
Fears about the impact of economic decline in China are also spooking financial markets. While China’s growth rate slowed to a 25-year low in 2015, it remains at 6.9%, enviable by any developed market standards. Even if things go from bad to worse, China exports represented less than 1% of U.S. GDP last year.
Crude oil prices have gone from low to lower in 2016, and the collapse of the U.S. shale industry has weighed heavily on the overall U.S. economy. Morgan Stanley is the latest Wall Street firm to lower oil price projections and now expects crude oil to remain below $30/bbl for at least another year, putting even more pressure on most of the energy sector.
Unfortunately, there’s no sure-fire way to predict a recession, but many business executives have…
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