Last week Wednesday (the 14th) was a bad day, at least it was a bad day for the markets. I actually had a pretty nice day, maybe you did too. The market took a hit though, the DOW was down 800 points (about 3%), its worst day of this year, and other indexes didn’t fare much better. The chatter is heating up, the next recession is on the horizon! But is it?
Well, the Wall Street Journal certainly seems to think so. In an article title Stocks losses deepen as a key recession warning surfaces published last week, the WSJ espouses the fearful sentiment pervading the industry last week. A few quotes:
Whether the events presage an economic calamity or just an alarming spasm are unclear. But unlike during the Great Recession, global leaders are not working in unison to confront mounting problems and arrest the slowdown. Instead, they are increasingly at one another’s throats.
This sounds especially bad. At least in 2008 people were trying to fix the problem!
“The stars are aligned across the curve that the economy is headed for a big fall,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “The yield curves are all crying timber that a recession is almost a reality, and investors are tripping over themselves to get out of the way.”
Yikes, sounds like someone is about to get trampled.
The U.S. economy has shown signs of weakening in recent months, but high levels of consumer spending in the United States have helped enormously. Still, the escalating trade war between Trump and Chinese leaders has stopped many businesses from investing. And there are signs that the large tariffs he has placed on many Chinese imports is costing U.S. businesses and consumers billions of dollars.
If this isn’t a rollercoaster of emotion I don’t what is. Signs of weakening? Oh no! High levels of consumer spending? Okay, so not too bad. Tariffs are costing U.S. business and consumer billions? Run from the market!
I kid, but this is actually serious stuff. The WSJ is only one among many news outlets forecasting the next crash. The problem is, no one knows when the next crash will be, regardless of ‘key recession warning’ claims, because the market moves on new news and information, things that no one knows. Unless of course, you know the future.
Just today, exactly one week later, we’ve got a new narrative in the news: Stocks are on a comeback. Dow rises 250 points. The rollercoaster is exhausting.
Instead of tuning into the cycle, remember that great returns don’t come from any ability to time the next crash. The market recesses sometimes, and it could be contracting now, or next year, or in five years. We don’t know when, we just know that’s how the market works. The disciplined investor who has a plan for whenever the next crash comes and a coach to get them through it will always win.