I'm Beginning To Believe The Recession Narrative Was Totally Bogus

I’m Beginning To Believe The Recession Narrative Was Totally Bogus

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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If the jobs number revealed anything today, it is that the pace of employment is not slowing down. It would also suggest that the narrative about the coming recession which caused the big stock market sell-off was bogus.  Let me know be clear slowing growth and recession are not one and the same. One is a slower pace of growth and the other is a contracting economy, very different.

I talked about this in today’s video segment, but I will try my best to summarize it. Stocks Still May Have Much Further To Rise

The job non-farm payroll showed robust hiring in the private sector, with 186k jobs created.  60k of those jobs came in the healthcare sector, while 37k came in professional and business service.  It would suggest stable well-paying jobs and not temporary workers. Also, average hours worked and wages both increased. 

3% What?

Additionally, when I was looking at my daily GDP checks, I notice that the CNBC Rapid Update is now suggesting 2Q GDP growth of 3% on average.  Now granted, the second quarter is only five days old, but 3%?! We are supposed to be heading into a recession. How could we be targeting 3% 2Q growth?

What Recession?

Well, if we were supposed to be entering a recession and and this quarter was supposed to be the start of it, then what does it mean that GDPNow is tracking the first quarter at 2.1%. What are we supposed to think about CNBC tracking 2Q at 3%? It probably says that earnings estimates for the S&P 500 fell too far, and now they will need to be revised higher.

Upward Revisions

Well, look at that! That is in fact what happened, ever so slightly. S&P Dow Jones just released their latest estimates and guess what 2019 stayed unchanged dropping to $165.33 from $165.34 last week. But the outlook for 2020 saw its estimates rise to $186.40 from $186.36.  Is it the start of a new trend, hard to say, but surely it fits in with my point.

The market may have gotten too cynical in the late winter months and now may be too cheap trading at just 15.5 times 2020 earnings estimates. Especially given the earnings forecast which is calling for nearly 13% growth in 2020.

Will I be right or wrong? Only time will tell. But it sure does give you something to think about if you are still in the bear camp.

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