Are We Being Too Optimistic About the Economy?

November 25, 2019

The stock market has reached record highs recently, and economists are optimistic that, even as manufacturing continues to contract, the strength of the American consumer will keep the economy growing apace. However, in a recent interview with CNBC, the head of the Economic Cycle Reseach Institue said that such optimism is misplaced.

Lakshman Achuthan argues that the hard data simply doesn’t support the narrative driving the market rally. ECRI points out that data for industrial production and retail sales are still declining. Year-over-year industrial growth is still at a 3 year low.

ECRI points out that setting record highs in the stock market does not mean that the risk of recession is lessening. In fact, the S&P reached a new high just two months before the Great Recession began. Stocks in 1990 hit new records in the very same month that a recession began. Regardless of what the market is saying, we are not out of the woods with regards to recessionary risk until the leading data show sustained growth in the economy.

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