Money in a Minute: Recession? What Recession?

Freeman / Money Talks News

Every Friday I recap “news you can use” from the week: a handful of quotes from major (and often expensive) news sources, so you can stay up to date on the news that affects your money without spending a dime and in less than a minute.

Check out the news blurbs, then read on to see my take on the week.

Investors Fear Stock-Market Rally Will Be Short-Lived (Aug. 1, Wall Street Journal):

Bearish investors aren’t buying into hopes that July’s rapid advance for stocks heralds the start of a new bull market.

If anything, they say the worst might be yet to come as inflation remains high, the Federal Reserve plans more interest-rate increases and stocks trade at valuations that still don’t look cheap.

Renters Finally See Market Starting to Cool After Record Growth (Aug. 1, Wall Street Journal):

The rental markets that are slowing fastest include many of the cities that saw some of the country’s fastest-growing rents during the pandemic, such as Phoenix, Las Vegas and Tampa, Fla.

Mortgage applications inch up for the first time in five weeks (Aug. 3, CNBC):

Total mortgage demand increased 1.2% as the average 30-year fixed mortgage rate made the largest weekly drop since 2020.

The slight increases came as mortgage rates dropped 0.31 percentage point from 5.74% to 5.43% …

Why the U.S. stock rally looks more like a new bull market than a bear bounce to these analysts (Aug. 3, MarketWatch):

“The risk that the recent advance is merely a bear market rally has not been eliminated. But … the technical improvement up to this point is more akin to a new cyclical bull market than a bear market rally,” said Ed Clissold and Thanh Nguyen of Ned Davis Research, in a Tuesday note.

Goldman, Bernstein Strategists Say Stocks Rally Set to Fade (Aug. 4, Bloomberg):

The recent brisk rebound in equity markets won’t last as macroeconomic data continue to deteriorate and earnings forecasts are being slashed, strategists at Goldman Sachs Group Inc. and Sanford C. Bernstein warn.

US Job Growth Surges, Tempering Recession Alarm and Pressing Fed (Aug. 5, Bloomberg):

US employers added more than double the number of jobs forecast, illustrating rock-solid labor demand that tempers recession fears and suggests the Federal Reserve will press on with steep interest-rate hikes to thwart inflation.

My take on the week: Bull or bear market? Yes.

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On Friday, the Labor Department announced the July employment numbers, and they were nothing short of astounding.

About 528,000 non-farm jobs were added in July, nearly double most estimates. The unemployment rate fell to 3.5%, as low as it’s been in 50 years. June employment numbers were also revised upward.

If this is a recession, it’s got a funny way of showing it.

It is true, however, that outside of the sizzling labor market, things aren’t all that hot.

Oil broke below $90 a barrel Thursday, down from a June high of $130. Other commodities, from wheat to copper, are also well off their highs. While this is good for consumers, it’s indicative of a weakening economy. So are slowing sales, which we’ve seen from many of the companies that recently announced earnings.

So one part of our economy — jobs — is showing monster strength, while other parts are showing major weakness.

Seem confusing? It is, which is why you see conflicting headlines like these above: “Goldman, Bernstein Strategists Say Stocks Rally Set to Fade” and “Why the U.S. stock rally looks more like a new bull market than a bear bounce.”

The bulls have been winning this argument lately. July was one of the best months we’ve had in years, with stocks rebounding by 20%.

As I said in my last column, the stock market is suggesting the worst is over, the landing will be soft, the Federal Reserve will beat inflation without causing a deep recession, interest rates can stop going up, and good times are just around the corner.

I remain skeptical because, primarily with the hot labor market, further Fed interest rate increases are virtually assured. Rising rates aren’t typically good for economic activity or company profits. Hence the expression, “Don’t fight the Fed.”

While we wait to see who wins the bull/bear tug-of-war, we do what we always do: Look for stocks we’d like to add to our portfolios.

I bought one a few days ago: Eli Lilly, the giant drug company. It wasn’t cheap; it’s closer to its 52-week high than the low. But the company has a stellar pipeline of new drugs coming out, including a potential Alzheimer’s treatment.

You can see my entire portfolio here.

Important: I’m telling you what I’m doing, not giving you investment advice. I can’t do the latter because I don’t know you or your situation. Stocks entail risk. Do your own research, make your own decisions and, above all, don’t blame me if I’m wrong. It wouldn’t be the first time.

Check out my podcast

I hope having these notes makes your life easier. Want something else that’s concise and impactful? Check out my weekly “Money!” podcasts. They’re brief, casual conversations with news recaps, as well as tips and tricks to make you richer.

You can listen right here on the Money Talks News website, or download them wherever you get your podcasts. Just look for Money! with Stacy Johnson.

Check them out: You’ll be glad you did!

About me

I founded Money Talks News in 1991. I’m a CPA, and I have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.