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Treasury Secretary Says Growing Recession Fears Are ‘Media Driven’

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Treasury Secretary Scott Bessent said Sunday that the American public’s growing recession fears are largely “media driven.”

Bessent disputed recent headlines which claimed that the Dow Jones Industrial Average is headed for its worst April since 1932, stating that the stock market is bouncing back after its major drop earlier in the month. A poll conducted by ABC News, The Washington Post and Ipsos found that 72% of Americans believe it is “likely” that President Donald Trump’s tariffs will cause a recession.

“When I look at some of the things that are being published, there was a story 10 days ago that said, ‘this is the worst April for the stock market since the Great Depression.’ Ten days later, the NASDAQ is now up in the month of April, and I haven’t seen a story that says, ‘oh, the stock market has seen [its] biggest bounce back ever.’ So, I think a lot of this is media driven,” Bessent said on ABC’s “This Week.”

The Wall Street Journal issued a stark warning about the stock market in its April 21 piece, “Dow Headed for Worst April Since 132 as Investor Sent ‘No Confidence’ Signal,” stating that Dow Jones Industrial Average dropped by almost 1,000 points. The article further stated that the S&P 500’s performance since Jan. 20 is the worst for any president since 1928.

After an plunge April 21, the stock market surged 1,016.57 points, or 2.66% the following day while the S&P 500 and NASDAQ rose 2.51% and 2.71%. The market continued to bounce back throughout the remainder of the week, with the S&P 500 and NASDAQ gaining 4.6% and 6.7% by Friday, according to CNBC. (Read more from “Treasury Secretary Says Growing Recession Fears Are ‘Media Driven'” HERE)

Bad News: US Is Likely Facing a Deeper-Than-Normal Recession

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Tolstoy famously wrote that all happy families resemble one another, but each unhappy family is unhappy in its own way. He might have said the same about unhappy economies — and added that there are all too many signs the US recession now in the works will likely be of the particularly unhappier kind.

Among the reasons to fear a deeper-than-normal recession is that monetary-policy tightening is causing the equity and credit market bubbles to burst. Since the start of the year, not only has the Federal Reserve’s abrupt policy shift wiped out almost 20% of the stock market’s value; it has also wiped out nearly 20% in the bond market’s value and close to 50% in the value of exotic markets like bitcoin.

The combined evaporation of some $12 trillion, or 50% of gross domestic product, in household wealth since the start of the year must be expected to cool consumer demand in time. Households will begin to stress about their reduced 401(k)s, which will make them want to rebuild their savings. According to the Federal Reserve, for every sustained $1 loss in household wealth, consumers tend to reduce their spending by 4 cents.

This means that, although consumer spending has held up well to date, because of their financial-market losses consumers might soon be expected to reduce spending by as much as 2% of GDP. This is the last thing we need when consumers are already cutting back because of soaring gasoline and food prices and because their wages are being eroded by high inflation.

Another cause for concern is that the Fed’s tightening has led to an abrupt jump in the 30-year mortgage rate from around 3% at the year’s start to 5.5% at present. This has reduced the affordability of housing by 25%. That in turn is already leading to a marked cooling in housing demand. (Read more from “Bad News: US Is Likely Facing a Deeper-Than-Normal Recession” HERE)

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Bloomberg Asks Experts If a Recession Is Near. Here’s Their Answer.

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Bloomberg spoke to financial experts about the possibility of a recession in the near future, and their general reaction was … nahhhh.

John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, “There’s another story out there that’s gathering the attention of investors. The fundamentals remain intact in the sense of the U.S. economy, which continues to show us sustainability. The slowing does not appear to us to be recessionary.”

Michael Antonelli, institutional equity sales trader and managing director at Robert W. Baird & Co. explained, “If you think about the last month of market action, it was dominated by trade headlines, but in the background was pretty stable economic data absent of manufacturing. All the noise is masking that the economy, by and large, is doing OK.”

Dennis DeBusschere, head of portfolio strategy at Evercore ISI, added that if the manufacturing sector doesn’t plunge downward any more, “which seems like a much higher-probability event than many expect, an extended reversal of the safety panic should be expected.”

Kate Warne, an investment strategist at Edward Jones shares: “The earnings outlook is actually one of the things that is positive for stocks going forward. Expectations are a little higher for next year and I think that’s appropriate because we begin to get into a period where companies aren’t facing such strong comparisons from the previous year.” She added, “Companies are continuing to see good demand for their products even though they’re also facing rising costs.” (Read more from “Bloomberg Asks Experts If a Recession Is Near. Here’s Their Answer.” HERE)

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Jim Rogers: There’s a 100% Probability of a US Recession Within a Year

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Rogers Holdings Chairman Jim Rogers is certain that the U.S. economy will be in recession in the next 12 months.

During an interview on Bloomberg TV with Guy Johnson, the famous investor said that there was a 100 percent probability that the U.S. economy would be in a downturn within one year.

“It’s been seven years, eight years since we had the last recession in the U.S., and normally, historically we have them every four to seven years for whatever reason—at least we always have,” he said. “It doesn’t have to happen in four to seven years, but look at the debt, the debt is staggering.”

Most Wall Street economists see a much smaller chance of a U.S. recession within this span, with odds typically below 33 percent.

Rogers was not specific on what could trigger a disorderly deleveraging process and recession but claimed that sluggish or slowing economies in China, Japan, and the euro zone mean that there are many possible channels of contagion. (Read more from “Jim Rogers: There’s a 100% Probability of a US Recession Within a Year” HERE)

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US Recession Probability at Highest Levels Since Fall 2011

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The chances of a recession in the United States are at their highest levels since the fall of 2011, according to the CNBC Fed Survey.

The survey also showed recession fears rising for the sixth straight time among respondents, and are now sitting at 28.8 percent.

One fairly reliable recession indicator, the spread between the 2-year and 10-year bonds has weakened just about to its lowest level since the last recession. But it tends to signal recession at zero… So at 118 basis points, it’s softer, but not soft enough to signal recession . . .

Manufacturing looks to be contracting. Corporate profits are said to be in recession. And exports are weak. But the consumer is strong as is job growth and the service sector. (Read more from “US Recession Probability at Highest Levels Since Fall 2011” HERE)

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This Country is on a Verge of a Recession

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Statistics Canada revealed on July 31 that the Canadian economy shrank by 0.2% on an annualized basis in May, perhaps pushing the country over the edge into recessionary territory for the first half of 2015 . . .

The poor showing surprised economists, who predicted GDP to remain flat, but [instead it contracted] in the first quarter at an annual rate of 0.6%. Canada’s economy may or may not have technically dipped into recession this year — defined as two consecutive quarters of negative GDP growth — but it is surely facing some serious headwinds.

Attempts to rebound: Canada’s central bank slashed interest rates in July to 0.50%, the second cut this year, but that may not be enough to goose the economy. With rates already so low, there comes a point when interest rate cuts have diminishing returns. Consumer confidence in Canada is at a two-year low.

There are other fault lines in the Canadian economy. Fears over a housing bubble in key metro areas such as Toronto and Vancouver are rising.

“In light of its hotter price performance over the past three to five years and greater supply risk, this vulnerability appears to be comparatively high in the Toronto market,” the deputy chief economist of TD Bank wrote in a new report. (Read more from “This Country Is on a Verge of a Recession” HERE)

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ObamaCare Cuts Low-Wage Workweek Near Record Low

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Photo Credit: DUCKofD3ATH

Photo Credit: DUCKofD3ATH

Here’s something worth paying attention to this Labor Day: The workweek in low-wage industries has fallen back to the historic lows seen at the depths of the recession.

The White House and like-minded economists have disputed the notion that ObamaCare is having a meaningful impact on work hours by noting that the private-sector workweek has recovered pretty much back to where it was in 2007, before the economy tanked.

But that view from 40,000 feet overlooks what is happening in industries likely to feel the brunt of ObamaCare’s employment impact: those in which wages are modest and the ranks of the uninsured are high.

A more rigorous analysis of monthly industry data from the Bureau of Labor Statitics reveals a stark contrast between workers in low-wage industries and the rest of the private sector.

For the 30 million workers in industries where nonsupervisors average about $14.50 an hour or less, the workweek has been shrinking pretty steadily for the past 18 months, reversing a fledgling recovery in work hours.

Read more from this story HERE.

As Average Americans Lose 55% of their Wealth, the DC-Connected Enter the Gilded Age

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Photo Credit: 401(K) 2013

What Sequester? Washington Booms as a New Gilded Age Takes Root

By Elizabeth Williamson. On a bright spring morning, Debbie Driesman and her interior decorator surveyed progress on Norton Manor, the 40,000 square-foot house she’s building with her husband, information-technology entrepreneur Frank Islam. To make way for the French chateau-style manse, the family bought two houses on adjacent 4-acre lots and invited the local fire department to destroy them. For practice.

The manor, in suburban Washington, features a reflecting pool (just as the Capitol does), east and west wings (like the White House) and is configured for easy Secret Service coverage when VIP guests attend the couple’s Democratic Party fundraisers. Decorator Skip Sroka scoured the globe for Norton Manor’s marble fireplaces, hand-loomed carpets and several tons of gilded and Venetian chandeliers. The gardens are modeled, in part, after those of Henry VIII’s Hampton Court palace.

“If there’s something he can’t have that he wants, you have to find a way,” Ms. Driesman says of her exacting husband. “You can’t just tell him ‘no.’ ”

The sprawling compound is a product of Washington’s Gilded Age—a time of lush business profits initially fueled by government outsourcing and war. Some demographers predicted the boom here would ebb as federal spending shrank amid troop withdrawals from the Middle East and efforts to trim the deficit.

Instead, the region has shown surprising resilience, thanks to an economy that has steadily broadened beyond the government. More than a generation of heavy federal spending, it turns out, has provided the seed money for a Washington economy that now operates globally—less tied to the vicissitudes of the capital’s political rhythms. Read more from this story HERE.
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Wealth of most Americans down 55% since recession

By Constantine Von Hoffman. Increasing housing prices and the stock market’s posting all-time highs haven’t helped the plight most Americans. The average U.S. household has recovered only 45 percent of the wealth they lost during the recession, according to a report released yesterday from the Federal Reserve Bank of St. Louis.

This finding is a very different picture than one painted in a report earlier this year by the Fed that calculated Americans as a whole had regained 91 percent of their losses. The writers of the report released yesterday point out that the earlier number is based on aggregate household-net-worth data. However, this isn’t adjusted for inflation, population growth or the nature of the wealth. Further, they say much of recovery in net worth is because of the stock market, which means most of the improvement has been a boon only to wealthy families.

“Clearly, the 91 percent recovery of wealth losses portrayed by the aggregate nominal measure paints a different picture than the 45 percent recovery of wealth losses indicated by the average inflation-adjusted household measure,” the report said. “Considering the uneven recovery of wealth across households, a conclusion that the financial damage of the crisis and recession largely has been repaired is not justified,” the researchers said.

Household wealth plunged $16 trillion from the top of the real estate bubble in the third quarter of 2007 to the bottom of the bust in the first quarter of 2009. By the last three months of 2012, American households as a group had regained $14.7 trillion.

The report says almost two-thirds of the increase in aggregate household wealth is due to rising stock prices. This has disproportionately benefited the richest households: About 80 percent of stocks are held by the wealthiest 10 percent of the population. Read more from this story HERE.

Wealth Gap Between Whites and Blacks Has Grown Sharply Under Obama

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Photo Credit: Tax CreditsMillions of Americans suffered a loss of wealth during the recession and the sluggish recovery that followed. But the last half-decade has proved far worse for black and Hispanic families than for white families, starkly widening the already large gulf in wealth between non-Hispanic white Americans and most minority groups, according to a new study from the Urban Institute.

“It was already dismal,” Darrick Hamilton, a professor at the New School in New York, said of the wealth gap between black and white households. “It got even worse.”

Given the dynamics of the housing recovery and the rebound in the stock market, the wealth gap might still be growing, experts said, further dimming the prospects for economic advancement for current and future generations of Americans from minority groups.

The Urban Institute study found that the racial wealth gap yawned during the recession, even as the income gap between white Americans and nonwhite Americans remained stable. As of 2010, white families, on average, earned about $2 for every $1 that black and Hispanic families earned, a ratio that has remained roughly constant for the last 30 years. But when it comes to wealth — as measured by assets, like cash savings, homes and retirement accounts, minus debts, like mortgages and credit card balances — white families have far outpaced black and Hispanic ones. Before the recession, non-Hispanic white families, on average, were about four times as wealthy as nonwhite families, according to the Urban Institute’s analysis of Federal Reserve data. By 2010, whites were about six times as wealthy.

Read more from this story HERE.

Personal Assets Crash 22% Under Obama, Recession

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Photo Credit: Washington Examiner The struggling economy, President Obama’s inability to fix unemployment and the sour housing market have cut the value of assets held by adult Americans by 22 percent since 2007, according to Pew Research.

In a new analysis of American household fiscal healthiness, Pew also found that those 35 and older have a higher and out-of-whack debt-to-income ratio of 1.22, the highest in three decades.

The crash in household assets and rise in debt comes as Americans are paying more in payroll taxes and at the gas pump, an unhealthy concoction that is sapping support for Obama.

A new Economist/YouGov poll provided to Secrets found Americans split on Obama, with 47 percent approving of his job performance, 46 percent not. And younger voters are especially distressed, with Obama receiving just 43 percent approval from those 18-29 who went overwhelmingly for him in the 2012 election. It’s not better at Rasmussen Reports, which found that just 15 percent of adults view the economy as good to excellent and, in a related poll, that just 40 percent give Obama good marks for job creation.

Read more from this story HERE.