Kass published a good article where he highlighted the reasons a recession is all but impossible currently. He lists numerous reasons why the market might be unable to rally, but expecting a major recession and a massive selloff just doesn't appear in the cards.
Doug's reasons that a recession seems unlikely:
- large private payroll drops in excess of 175,000 a month (adjusting for nonrecurring issues, payrolls are still averaging about 95,000 growth over last four months);
- an inverted yield curve (it is positively sloped);
- acceleration in inflation (inflation is contained and so are expectations);
- an increase in real (anything but!);
- bloated corporate inventories (low inventories to sales in place now);
- retreating retail sales (they are expanding);
- negative year-over-year leading economic indicators (advancing now);
- a drop in factory orders (also rising) and;
- outsized durable spending relative to GDP (housing and autos remain at or near cyclical lows).
Read the rest of the article for some other good analysis of the market potential for a recession or a major rally. Don't always agree with his points, but his opinions are very sound and researched.
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