What Executives Say About the Possibility of a U.S. Recession
Comment of the Day

February 08 2016

Commentary by David Fuller

What Executives Say About the Possibility of a U.S. Recession

Here is the opening of this topical article from Bloomberg:

Executives across corporate America are being asked for their views on whether a recession is in the offing.

Growth in the U.S. decelerated to a 0.7 percent annualized rate in the fourth quarter as companies contended with a slower global economy. The median probability for a U.S. recession in the next 12 months jumped to 19 percent in last month’s Bloomberg survey of economists, the highest since February 2013.

As stock and oil prices slide, executives are offering their perspectives on the economy in conversations with analysts and investors. These comments were collected by Bloomberg from earnings calls, meetings and conferences the past three weeks.

John Thain, chairman and chief executive officer, CIT Group Inc.: 
“Given the recent performance of the equity market and our stock price, the market seems to indicate a recession is imminent. I don’t see that. Low energy prices do not cause recessions. While the energy sector itself is weak, the U.S. economy is still growing." (Feb. 2)

Stephen Schwarzman, chairman and CEO, Blackstone Group LP: 
“While it’s always possible that a market correction becomes something more significant, we, at Blackstone, do not see a recession in the U.S. We do believe that global GDP growth is slowing, and we’ve seen a slowdown within certain sectors and regions in our global portfolio as a result." (Jan. 28)

David Fuller's view

Stock markets are better indicators of investor sentiment than economic prospects.  Today, investors are frightened by uncertainty; excessively choppy market action due to high-frequency trading; forced sales by sovereign wealth funds, all of which are contributing to what will eventually be a healthy contraction in valuations.  

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