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Saturday, September 18, 2021

2020: USA, No Recession, Steady Economy, Low Inflation


US stocks will continue to rise this year on very little chance of a recession, and low inflation driving steady economic growth, with real GDP growing around 2.0%, and inflation remains below 2.0%.

That is our outlook for Y 2020. We do not see a recession in this year’s US economy. And that is because credit crunches invariably cause recessions. With the major central banks on course to increase the sizes of their balance sheets in Y 2020, a credit crunch looks highly unlikely. And the Fed is printing money.

Below are some of the Key factors we monitor on a daily basis, as follows;

  1. Politics: Politically 2020 is likely to be just a wild in the US as it was Y 2019. The US economy continues to perform well despite the Noise coming out of Washington and the MSM.
  2. GDP: On a Y-Y basis, real GDP growth in the US has been hanging around 2.0% since Q-1 of Y 2010. Now seeing real GDP increasing 2.5% this year, better than last year’s 2.3%.
  3. Productivity: The surprise in Y 2020 will be that a tightening labor market boosts productivity, which would allow nominal wages to continue increasing faster than consumer prices, a win-win situation.
  4. Inflation: Inflation is dead for this year.
  5. Fed: the Fed to remain on hold through this year’s Presidential and congressional elections.
  6. The world: Seeing stronger growth overseas in Y 2020 than in Y 2019.

Reuters explained that investors enter the new decade with a ‘Spring in their Step,’ after watching world stocks add over $25-T in value in the past 10 yrs and a bond rally put $13-T worth of bond yields below Zero.

This economic cycle is the longest in US history and a recession looks inevitable in the new decade, which also will mark 100 years since the Wall Street crash of Y 1929. So there is caution on the Street.

The Big Q: What will markets do in this decade?

The Big A: decade of rock-bottom interest rates did not revive growth and inflation in developed nations, but they certainly inflated markets, as prices for bonds, equities and real estate show.

The inequality they birthed triggered a widespread backlash Vs globalization. The result is a de-globalizing world, or as Morgan Stanley puts it, “slow-balisation.”

The bank expects tech investments to outperform, in particular smaller internet firms in China, as protectionism hurts larger rivals. But it predicts less exciting returns “a lower and flatter frontier compared to prior decades, and especially compared to the 10 yrs post-GFC (global financial crisis).”

Wednesday, the major US stock market indexes finished at: DJIA +161.41 at 28745.00, NAS Comp +60.66 at 9129.27, S&P +15.87 at 3253.05

Volume: Trade on the NYSE came in at 897-M/shares exchanged

  • NAS Comp +1.8% YTD
  • S&P 500 +0.7% YTD
  • DJIA +0.7% YTD
  • Russell 2000 -0.3% YTD

HeffX-LTN’s overall technical outlook for the major US stock market indexes is Very Bullish in here.

Looking Ahead: investors will receive the weekly Initial and Continuing Claims report Thursday.

Stay tuned…

Paul Ebeling
Paul A. Ebeling, a polymath, excels, in diverse fields of knowledge Including Pattern Recognition Analysis in Equities, Commodities and Foreign Exchange, and he is the author of "The Red Roadmaster's Technical Report on the US Major Market Indices, a highly regarded, weekly financial market commentary. He is a philosopher, issuing insights on a wide range of subjects to over a million cohorts. An international audience of opinion makers, business leaders, and global organizations recognize Ebeling as an expert.   

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