Recession Fears Overblown, See Stocks Rallying to Record Highs

Recession Fears Overblown, See Stocks Rallying to Record Highs


Monday, Federated Investors’ strategist Steve Chiavarone predicts the recent market plunge is temporary and that recession fears are totally unsubstantiated.

In a TV interview Monday, Mr. Chiavarone said that he sees stocks soaring to new record highs because of labor market trends, inflation levels, the US Treasury yield curve and credit spreads.

“We do not have any of the early signs of recession. Yet, we have a market where despite 20% earnings growth, the P/E ratios have fallen 20%,” he said.

“What that tells us is the market is pricing in recession in 2019. We just don’t think that is going to happen,” he said.

“Our best analysis, as we look at markets and, as we look at the economy, and that is that things are stable,” Mr. Chiavarone said. “We are confident where markets are going to go over the next 12 months.”

Declining global economic growth rates will boost defensive stocks and could lead to opportunities in emerging market currencies and mortgage bonds in the year ahead, asset manager Pacific Investment Management Co  said in its Y 2019 outlook.

Higher interest rates and fading fiscal stimulus it they happen will leave the US economy at a 30% chance of falling into a recession, the highest probability at any point during the 9-year economic expansion, Pimco said, according to Reuters.

“The models are flashing Orange rather than Red,” the firm wrote it its note. 

We wait, We see, and always take what the market gives.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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