Pre-sale stocks: Why we think we’re in a recession when the data says otherwise | Bot To News

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It seems like you can’t go anywhere these days without bumping head-on into yet another ominous prediction of an imminent recession. CEOs, portfolio managers, politicians, journalists, second cousins ​​and even cardi b they sound the alarm: Hear! Listen! An economic crisis awaits everyone who dares to enter the year 2023!

But those predictions run counter to the reams of positive economic data we’ve seen: The labor market is healthy, wages are rising, Americans are spending and GDP is strong. Business is also good: companies are largely exceeding expected revenues and reporting positive earnings results.

The Federal Reserve’s regime of painful rate hikes designed to tame persistent inflation could certainly chill the economy — as have events in Eastern Europe and China — but the economy has successfully weathered nearly a year of hikes and the war in Ukraine with little time left. dent.

It’s possible that recession chatter is just that. Chatting.

What’s happening: No one would ever accuse investors of avoiding their emotions: passions run high on trading floors, where feelings are often as valid as facts and fear and greed can sometimes run the show. Economists, on the other hand, are a stoic, data-dependent bunch. The U.S. economy is not Wall Street, and market downturns are not recessions—but sometimes they get mixed up in public and their boundaries become blurred.

That seems to be the case: The Fed’s attempts to reduce sky-high inflation are having too much of an impact on markets—the S&P 500 is down about 18% this year. however, so far there has been little impact on the US economy as a whole.

This week, several top executives warned of an economic slowdown in 2023. The CEOs of Goldman Sachs, JPMorgan, General Motors, Walmart, United and Union Pacific all said they were preparing plans for less profitable times. But behind those “CEO PREDICTS RECESSION” headlines lies a lot of uncertainty.

Rising interest rates and geopolitical chaos point to storm clouds on the horizon, JPMorgan CEO Jamie Dimon told CNBC on Tuesday: “As you look ahead, these things can derail the economy and cause this mild to severe recession that people are experiencing. worried about.” When pressed to predict what’s coming, he demurred. “It could be a hurricane. We just don’t know,” he said. What’s left unsaid is that sunny days are also possible.

Loopback: United Airlines CEO Scott Kirby also told CNBC on Tuesday that “we’re probably going to have a mild Fed-induced recession.” He then said that demand in his industry is stronger than ever and that United entered the fourth quarter with profit margins that are near their highest in history. He sees no signs of slowing down on the horizon either.

So why does he think a recession is coming? “If I didn’t watch CNBC in the morning, the word ‘recession’ wouldn’t be in my vocabulary,” he said. “You just can’t see that in our data.”

It’s almost as if Kirby predicted a recession was imminent because other prominent voices were predicting a recession was imminent. And it’s possible that we’re all stuck in a feedback loop that reinforces unwarranted fear.

Prophecies are often self-fulfilling. If CEOs believe a recession is coming, they preemptively close the hatches—which means less spending and more layoffs, which in turn can lead to an economic downturn.

Goldman Chief Executive Officer David Solomon said on Tuesday that the bank may soon lay off staff and be cautious about its financial holdings amid growing economic uncertainty. Morgan Stanley is expected to cut its workforce by about 1,600 people, about 2% of its total.

Advantage: Some parts of Wall Street seem to be shunning recessionary fervor. A recent Goldman Sachs study found that the smart money is betting on a soft landing. Money managers favor industrial and commodity stocks that are sensitive to economic downturns. Goldman strategists noted that stocks that act as buffers during economic downturns, such as consumer staples and utilities, fell out of favor among mutual funds with assets totaling nearly $5 trillion.

“Current sector tilts are consistent with a soft landing position,” they wrote.

Oil prices have fallen to their lowest level since Christmas as worries about the health of the economy weigh on crude and overshadow worries about new restrictions imposed on Russian energy, my colleague Matt Egan reports.

Brent crude, the global benchmark, lost nearly 3% on Thursday to around $77.45 a barrel.

The oil sell-off came after the West hit Russia with new restrictions that, for now at least, do not appear to derail global energy markets.

On Monday, the European Union banned the import of oil from Russia by sea, while the West put a limit on Russian oil at $60. Both moves are designed to hurt Russia’s ability to finance its war in Ukraine without hurting consumers by forcing Moscow to cut oil production.

“Russian oil is still on the market. So far, it looks like Russia is ready to play,” said Robert Yawger, vice president of oil futures at Mizuho Securities.

The subdued response from energy markets is a welcome gift for Americans taking long drives this holiday season, as gas station prices are expected to continue to fall.

U.S. crude hit its lowest level since Dec. 23, 2021 this week before recovering slightly on Thursday to trade up 2% at $73.60 a barrel. As a result, oil has fallen 43% since it briefly topped $130 a barrel in March on fears of a Russian invasion of Ukraine.

The national average price of regular gasoline fell three cents to $3.33 a gallon on Thursday, according to AAA. Gas prices fell by 14 cents in the last week, and by 47 cents in a month. The national average is down a cent from a year ago, when they averaged $3.34 a gallon.

Britain is bracing for further strike disruption in the run-up to the Christmas period, as ambulance drivers and nurses join rail operators and postal workers in the worst wave of walkouts the country has seen in at least a decade, my colleague Hanna Ziady reports .

More than 20,000 ambulance workers, including paramedics and call attendants, will strike on December 21 over a pay dispute, according to the GMB, Unison and Unite unions.

The strike will involve just under half of all ambulance drivers in England, Wales and Northern Ireland, although unions have said they will cover life-threatening emergencies during the walkout. More than 10,000 emergency workers, represented by the GMB union, will strike again on December 28.

Strikes have gripped the UK this year as workers grapple with a cost-of-living crisis and stagnant wages. Consumer prices rose by 11.1% in the year to October, which is the highest value in the last 41 years. Taking into account inflation, average wages fell at the beginning of this year by the biggest drop on record, and they continued to fall in the period June-September.

According to The Times newspaper, one million British workers are expected to go on strike in December and January. Figures from the Office for National Statistics show that Britain has already lost at least 741,000 strike days this year, putting it on course for the worst year of industrial disputes in at least a decade.

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