Why Fears of a Recession May be Greatly Overblown

2019 has become the most delirious on record.

With trade war barbs and yield curves inverting, most of us have no idea if we’re coming or going anywhere.  Many investors have become so terrified, they’ve left the market altogether. Others have sought the safe havens of gold, and even REITs for their high dividends.

However, as bad as things may appear on the outside, there are pockets of strength.

In fact, growth forecasts are now rising, and the economy looks nowhere as bad as the bond market yields would have us believe.  We have the U.S. consumer to thank for that. Even with all of the chaos this summer, consumers are resilient, and they’re spending.

Consumer Spending Just Increased 0.7% Month over Month

July 2019 retail sales jumped 0.7% month over month.  Excluding autos, retail sales were up a robust 1.0% in July. That’s quite an encouraging sign.  After all, consumer spending — the primary catalyst of economic growth — remains healthy even as other sectors of the economy, such as business investment, have weakened with the trade war.

“The U.S. is pretty strong actually. The markets are trading more off the headline risk, particularly around tariffs, than the actual fundamentals, at least from the U.S. data,” said Tony Bedikian, head of global markets at Citizens Bank, as quoted by CNBC.  “The jury is still out whether the market is going to be correct here, and whether we are going to see a slowdown.”

“We’re not seeing that in the data.”

Even homebuilder confidence just increased, as mortgage rates pulled back.  In fact, builder confidence for single-family homes hit 66 in August 2017 – a point higher month over month.  As long as that number is above 50, it’s a positive. As a result of all of this, economists just raised their forecasts for Q3 GDP by 0.2 to a median 2% pace, according to a CNBC survey.