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Tags: recession | economy | wall street | federal reserve

Experts Say Wall Street Signaling Likely Recession


By    |   Monday, 26 September 2022 09:02 AM EDT

Wall Street is sending strong signals of a likely recession.

In two bleak warnings, investors are more than a little worried about the direction of the nation's economy.

The Wall Street Journal noted Sunday that the Dow Jones Transportation Average, which tracks 20 large companies, has dropped 12% in September, while the Dow Jones Industrial Average briefly hit a bear market Friday when it recorded a 700-point drop before bouncing back, Fox Business reported.

Declines in transportation stocks have historically pointed to tough economic times because of a lower demand for goods — expected due to the Federal Reserve's aggressive rate hikes, according to the news outlets.

"That's a confirmation we're headed for a recession," Peter Cardillo, chief market economist at Spartan Capital, told the Journal about the downturn in transport stocks. He predicted a mild global recession that will last well into 2023.

Hopes now of a "soft landing" for the economy are dead, Fox Business reported.

"Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude, and duration of a potential recession and investment strategies for that outlook," Goldman Sachs' David Kostin said in a bleak warning Friday, the Journal and Fox Business reported.

The Journal explained that behind last week's market slide were earlier warnings by FedEx that outlined plans to hike shipping rates to help offset lower flumes of goods moving around the world.

"They built out a lot of capacity when everyone was buying stuff, and now they're stuck with excess capacity," Peter Boockvar, chief investment adviser of Bleakley Financial Group, told the Journal about some transportation stocks. "At the same time, people are buying less stuff."

On Thursday, the Federal Reserve chairman Jerome Powell also suggested a desired soft landing for the economy, or a more gradual slowing, may be off the table.

"That's going to depend on how quickly wage and price inflation pressures come down, whether expectations remain anchored, and whether, also, do we get more labor supply, which would help as well. In addition, the chances of a soft landing are likely to diminish to the extent that policy needs to be more restrictive or restrictive for longer," Powell said during his press conference, Fox Business noted.

Investors have been turned off by high energy prices and labor disagreements between the biggest freight railroads and union leaders, the Journal reported, noting oil has declined in recent weeks but is still up 11% for the year, the Journal reported.

"It doesn't surprise me that prices have come down so much," said Olivia Engel of State Street Global Advisors and chief investment officer of Active Quantitative Equity. She told the Journal it's unlikely that investors will soon become bullish on logistics companies.

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Wall Street is sending strong signals of a likely recession.
recession, economy, wall street, federal reserve
Monday, 26 September 2022 09:02 AM
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