This Week In Stocks And The Economy

October 20, 2018

After the recent stock market volatility, some observers raised fears a recession may be on the way.

 

The stock market is a leading indicator for the economy, and the economic expansion is indeed the second longest in modern U.S. history.

 

So, it is perhaps not surprising major media outlets ran headlines like these following the two-day plunge of October 10th and 11th.

 

 

Was the drop in stock prices a precursor to a recession?

 

It does not look that way from data released this past week showing how the U.S. index of leading economic indicators (LEI) continued its surge into record territory.

 

 

A private business group tracks the LEI; comprised of 10 components measuring the current economic outlook. This index has a long history and collapsed months before every recession in the post-War era. With the momentum it's showing, it's hard to see how the economy can suddenly nosedive.

 

Conference Board economists upped their forecast for growth of the U.S. economy, raising its August projected growth rate in gross domestic product of 3% to 3.5% in September—a substantial adjustment in expectations.

 

Meanwhile, job openings again hit a new record, according to the latest release from the Department of Labor.

 

 

Making the record job openings data extraordinarily unusual is that higher wages have not caused a surge in inflation—record job openings logically imply that finding workers is growing more difficult and forces wages higher. Historically, wages were the primary cause of inflation in the U.S., so this is something to watch.

 

However, as previously reported, an increase in productivity masked wage gains in the second quarter of 2018. The productivity surge last quarter has not received broad media coverage, but labor costs declined by 1%, even as employee wages grew, according to the most recent government data.

 

The U.S. index of leading economic indicators (LEI) continued its surge into record territory this past week, and share prices in stocks were little changed for the week.

 

The S&P 500 closed on Friday at 2767.78, less than 6% off its all-time high, settling last week after a plunge a week earlier.

 

 

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.  It is a market value weighted index with each stock's weight in the index proportionate to its market value. You cannot invest directly into an index.

 

 

This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation. Tax laws are subject to change. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. Past performance is not an indicator of your future results.

This article was written by a professional financial journalist for Private Group Wealth Management, LLC., and is not intended as legal or investment advice.

© 2018. All Rights Reserved.

 

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