Economic Slowdown or Recession?

Most economists seem to think the U.S. economy is just slowing down, but not heading towards recession.   However, the stock market seems to be forecasting a recession.

So which is it?

On one hand, the data indicates a slowing, but still positive, economy.   No contraction of GDP is sight yet.

However, individual stocks seem to be portraying a different situation.   Many stocks have been falling several months, with some down as much as 90% (e.g. oil and materials sector stocks).  Even the previous market leaders, technology and health care.  For example, Netflix is down about 38% from its all time high in December 2015.    Amazon is down about 28% in the same time frame.  Yesterday, Linkedin and Tableau both fell about 45% after disappointing earnings.

Either the stocks were extremely overpriced for perfection, or the economy is headed for a recession.
I think we are at an inflection point.   If the market continues lower, a recession is likely coming.  If the market demonstrates a major reversal in the next couple weeks, a slowdown could be the  explanation.

For now, I continue to remain cautious, waiting for market to show a clear direction.

Disclosure:  We own shares of Netflix.

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This is not financial advice. Please consult a professional advisor.

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