In a deluge of dire warnings, Wall Street analysts say they believe that markets are sending strong signals that a recession is looming on the horizon.
A pair of dark signs came from investors in recent days, including the Dow Jones Industrial Average briefly dipping into bear market territory last Friday before a short-lived rally.
The benchmark index shed 700 points on Friday to reach a pivotal low before edging back upwards, but it’s the Dow’s Transportation Average that has many experts on edge.
This average tracks 20 large companies and has cratered 12% thus far in September. This is important because drops in these equities have historically signaled rough economic times due to lower demand for goods.
Spartan Capital chief market economist Peter Cardillo agrees that the transportation stocks dropping is “confirmation” that the nation is heading into a recession. His prediction, made to the Wall Street Journal, is for a mild recession across the globe that will continue well into next year.
Goldman now predicting another 75 bps hike by Fed in early November… 50 bps in December… and 25 bps in February…bringing Feds funds rate to 4.75%…
Fed raising rates hard into a recession and a rapidly weakening housing market. Buckle up !! pic.twitter.com/dgF6ax5bPD
— Wall Street Silver (@WallStreetSilv) September 24, 2022
The Federal Reserve is bailing water out of the economy almost on a monthly basis with regular 75-basis-point increases, and analysts see at least one more on the horizon. This, of course, is done to counter inflation that has ravaged President Joe Biden’s economy.
Radical government spending, some of which came through the COVID-19 pandemic in a misguided attempt to keep businesses going, is now eating away at every paycheck in the form of inflation.
The Fed’s efforts to rein in skyrocketing prices are countered by its desire for a “soft landing” for the economy, but the central bank many times has reiterated its prioritizing of bringing down inflation over avoiding severe economic contraction.
Right now, it appears the Fed is getting its wish.
David Kostin of Goldman Sachs said Friday that most equity investors now believe that “a hard landing scenario is inevitable.” They are not debating the reality of a looming recession but rather how deep it will sink the economy and how long that will last.
People are cutting back on purchases of discretionary items as soaring prices for the basics eat up paychecks. No amount of denial by the Biden administration changes the mess that reckless spending has put the economy in, and recession now seems all but certain.