Tomorrow’s market data will be the last. Trading is slowing down for the holidays so tomorrow could have some significant market moving data. These figures could have significant implications for the start of the new year, and will be refocused on the US’s economic outlook.
A strong majority of economists still expect the US will enter recession next year. That appears to also be the assessment of many CEOs, as the theme from last quarter’s earnings was of cutting guidance and cautionary outlook. There is a lot of disagreement about how severe a recession will be. Many people base their expectations on how the Fed will respond to new data.
Charting the trend
Businesses will reduce their investment if they expect there to be recession. They will also try to increase cash reserves to weather any uncertainty. They will also spend less, which contributes to a slower economy. A market downturn could be a self-fulfilling prophecy. The general gloominess is also reflected in comments by the Fed that interest rates will continue rising.
While expectations of slower growth can lead to slower growth, that usually doesn’t tip over to be a full-blown recession. A so-called “hard landing” implies that the…