The Market's Excessive Recession Fears

Sheraz Mian
8 min read

In This Article:

Monday, August 5, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a comment on the ongoing market turmoil that reflects renewed macroeconomic worries, in addition to featuring updated research reports on 16 major stocks, including Johnson & Johnson (JNJ), T-Mobile US, Inc. (TMUS) and Marsh & McLennan Companies, Inc. (MMC), as well as a micro-cap stock, Natural Health Trends Corp. (NHTC).  These research reports have been hand-picked from roughly 70 reports published by our analyst team today. You can see all of today’s research reports here >>>

The Market's Recession Fears

These fears have made a dramatic comeback in recent days, particulalry in the wake of Friday's soft(ish) July jobs reading that in turn followed the Fed meeting that was broadly interpreted to have signaled the long-awaited easing cycle to get underway at the central bank's September meeting.

The immediate trigger for the Monday sell-off in the U.S. is the overnight massive downturn in the Japanese market and fearful interpretations of Berkshire Hathaway's sale of half of its position in Apple shares over the weekend.

The magnitude of the U.S. indexes' pre-open weakness and the post-open follow through has almsot morphed into this almost the sky-is-falling narrative, particulalry from those segments of the market commentariat that were dead sure of a recession ever since the Fed started tightening policy but had finally gotten quiet after repeatedly getting it wrong.

Are the recession propponents finally right? Even a broken clock is right twice every day, but I am very confident that those patting themselves on the back for getting the recession call right, albeit in a delayed fashion, will be disproved all over again.

I am not suggesting that there is no recession risk or it can never happen. All I am arguing is that while economic growth is undoubtedly moderating, but there is still positive growth today and in the days ahead, as we saw in this morning's service-sector ISM reading and as the Atlanta Fed's GDPNow real-time economic tracker is showing.

I don't want to go into the nitty gritty of recent economic data to make my point, but I do want to point to the largely reassuring run of quarterly earnings releases in the Q2 reporting cycle.

The market wasn't impressed with the quarterly reports from the Tech leaders like Alphabet, Microsoft and Amazon, but the disappointment was more about these companies' rising capex spending levels rather than issues with their growth profile.

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