By Money and Markets Staff,Money & Markets, LLC, 2024-08-12
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Money & Markets Daily: The 5
It's impossible to keep up with everything going on in financial markets and the economy these days. That's where “The 5” from Money & Markets Daily comes in…
Let's start your week off right!
Still Recovering From Last Week's “Perfect Storm”
Last Monday, we saw a “perfect storm” of market factors that led to an unexpectedly sharp decline in stocks.
From overleveraged hedge funds to international investors banking on the yen carry trade, it seemed like everyone was selling at once. Indeed, as our own Adam O'Dell noted in last Tuesday's Money & Markets Daily, 23 stocks were declining for every single stock that booked gains on Monday. The market's “fear gauge” Volatility Index (VIX) reached its third-highest reading ever recorded.
Fortunately, the rampant selling died off nearly as quickly as it began. Stocks resumed their upward march throughout the rest of the week, but investors are still leery…
Should Markets Price in a Recession?
Ever since Fed Chair Jerome Powell committed to the fastest rate-hiking cycle in 40 years, investors have been worried that his bold actions might plunge the economy into a recession.
Many experts have also been skeptical that such an aggressive Fed policy could still engineer a “soft landing.” And based on recent economic data, it seems their fears may become justified.
JPMorgan analysts now calculate there's a 35% chance we'll see a recession before the end of the year. The company's CEO puts that number even higher, with a 65% chance of recession.
Veteran investor David Roche has likewise chimed in, saying that he believes a bear market is “probably” coming in 2025.
$4.9 Million in Stock Market Stress
China hasn't been immune to the latest stock market tumble. According to a recent Bloomberg update, investors are pulling record amounts of money out of Chinese markets.
At the same time, Chinese firms are investing a record $71 billion abroad.
This downturn is costing Chinese investors more than just their money. It's costing them their health.
A recent study from medical experts at the National University of Singapore and Peking University indicated that a stock market decline of just 1% in China led to an increase in hospital visits for cardiovascular and mental health issues.
That same report estimated that a 10% decline in the Chinese stock market would lead to an additional $4.9 million in health care costs for the country as a whole.
That's medical proof that it pays to do your due diligence when investing in emerging markets.
All Eyes on This Week's Earnings Reports
With a potential recession on the horizon, investors are now eager for any economic data that might give them clues about the health of the average consumer's pocketbook.
If consumer spending stays strong, a recession is less likely. One way to gauge consumer spending is through the earnings reported by major retail chains like Walmart Inc. (NYSE: WMT) and Home Depot Inc. (NYSE: HD) — both of which are scheduled to report this week:
Earnings week is always a pivotal time for individual stocks. But this time around, investors will be looking for some reassurance about the larger economy. If they don't get it, stocks might slip once again.
A Recession in YOUR Neighborhood?
“I've been seeing a lot more moving trucks in my neighborhood lately,” said Money & Markets Editor-at-Large Matt Collins.
We were talking about recessions over our team lunch last Tuesday, and the topic had shifted from traditional economic indicators to more anecdotal evidence. Matt pointed out that you'll often see signs of a recession in your community before the experts make it official.
In Matt's case, that anecdotal evidence takes the form of moving trucks — with multiple families leaving an increasingly expensive South Florida neighborhood all on the same weekend. Maybe it's just a coincidence. But maybe not…
So for this week's poll, we decided to ask: Are YOU seeing signs of a recession in your neighborhood? Anything out of the ordinary that would indicate economic activity is slowing down. Let us know at [email protected]. We'll loop back around to your anonymous responses in a future edition of “The 5.”
— Money & Markets Team
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