Growth may rebound in the near-term and offer some relief for stocks – Charles Schwab

Jeff Kleintop, Chief Global Investment Strategist at Charles Schwab, points out that there are ominous signs the world economy may be causing stocks to price in an imminent global recession, but he sees growth may rebound, offering some relief to equity prices.  

Key Quotes:  

“Has a global recession already begun? The past two months have seen plunging oil prices, several major economies reporting negative GDP for the third quarter, and the widely-watched global composite purchasing managers’ index slide from this year’s high down more than halfway towards 50, which marks the threshold level between growth and contraction. These ominous signs for the world economy may be causing stocks to begin to price in an imminent global recession.”

“Plunging oil prices, negative third quarter GDP growth in major economies and the decline in the global manufacturing PMI appear to be isolated, short-term events that already show signs of stabilization.”

“The breadth and strength of growth in the global economy is unlikely to be sustained throughout the year, but that doesn’t mean a recession is imminent. While the global PMI has declined, more than 80% of countries remain above 50, signaling continued economic growth.”

“The growth scare may soon fade. If these indicators of global growth rebound or stabilize in the near-term, rather than continue to weaken, it may provide some near-term relief for stocks that lately seem to be pricing in an imminent recession.”