Economists have warned that a recession is on the horizon and President Donald Trump has an opportunity to soften the blow. Instead, he’s making it worse.
Bloomberg News began its Thursday report on the economy by saying that the fundamentals aren’t looking as strong as they once did.
The huge decline in Apple revenue sent the markets into a tumble, but Kevin Hassett, President Donald Trump’s chairman of the Economic Council of Advisors did little to reassure the country everything would be fine. Instead, he predicted Apple wouldn’t be the last American company to take huge losses due to their business in China.
“Anything that suggests cracks in the earnings and macro foundation would go down poorly on Wall Street,” Bloomberg wrote. The statement came less than an hour after Hassett did the exact opposite.
“There are a heck of a lot of U.S. companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China,” he said in a Thursday CNN interview.
Bloomberg warned of an economy on “the brink of a bear market.” But investors are being told not to panic and that corporate earnings still remain strong. Confidence in that promise are taking a hit in the markets on Thursday. So far, the Dow Jones Industrial Average has fallen 600 points and the Nasdaq also dropped 3 percent.
The stimulus that was ushered in after the recession in 2008 will taper off in 2020. Jared Bernstein, a former economic advisor to Vice President Joe Biden, wrote in a July op-ed that existing economic “expansion” is approaching its 10th year, making it one of the longest. While expansions don’t die as the result of age, he noted bubbles and “central-bank mistakes or some unforeseen shock to the economy’s supply”could prophecy an economic disaster. Another predictor is a trade war.
“When it makes a big move, up or down, it’s telling you positive or negative things about future developments. The extreme move down was telling you we’d get this type of news-flow,” explained Alec Young, managing director of global markets research at FTSE Russell.
Trump’s trade war, ongoing war with the Federal Reserve and “stretched valuations” is only adding to the problem.
“The market is pricing in recession no matter what — the market has priced it in,” Bloomberg cited Jeff Carbone, managing partner at Cornerstone Wealth. “Now to what extent and when? That history hasn’t been written yet.”
Laurence Benedict, founder of Opportunistic Trader explained that when the markets aren’t doing well, the tumble feeds into itself and results in a self-fulfilling prophecy.