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Liz Ann Sonders, Senior Vice President, Chief Investment Strategist at Charles Schwab points out that current economic conditions do not look recessionary in the US at the moment but she warns risks are rising.

Key Quotes:  

“There’s more than one yield curve; and the Fed believes the one with the best “tell” for the economy shows elevated recession risk. Leading indicators’ trends paint a worse picture than their levels. Most “soft” measures of economic data have been deteriorating since the trade war began; but recently some of the “hard” data has succumbed to trade/tariff uncertainty.”

We will have a recession. There is nothing bombastic or provocative about that statement. Cycles always end in recession; the tricky part is accurately forecasting them ahead of time. There are flashpoints at present that suggest the risk is rising and/or already high; but the jury is still out. Clearly, whether this is yet another mid-cycle slowdown or the beginning of a recession matters a lot to the stock market. For now, I would declare the market’s “bet” that this is a slowdown, not a recession. But continued weakness could be a “tell,” given that historically the worst performance for the stock market has come in the six months leading into recessions.”