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By Connor
Smith| Friday, April 8 Concerns
Continue. Stocks
fell this week as fears about an economic slowdown weighed on short-term
sentiment. The Dow Jones Industrial Average fell
0.3% on the week, while the S&P 500 index dropped 1.3%.
The tech-heavy Nasdaq Composite fared even
worse with a 3.9% decline—its worst week since Jan. 21. The yield curve exited its short inversion
this week, with the 10-year Treasury once again yielding more than the
2-year. That could be good news, depending on your view of how long the
inversion has to hold to predict a recession. But the week still featured
another fresh recession signal: the Dow Jones
Transportation Average entered bear market territory on
Wednesday. That doesn't mean it's time to panic. Barron's
Teresa Rivas writes
that the latter indicator entered bear market territory in 2016 and 2018, when
no recession immediately followed. Teresa adds: Then there’s the reliability of the yield
curve itself. In the past, this heralded recessions when the Federal Reserve
tightened monetary policy; as money proved costlier to come by, people and
companies spent less, leading to a downturn. While it’s true that the Fed is
tightening, it’s doing so at a very modest pace, and Fed officials have
noted that the economic expansion isn’t on its last legs, thanks to a
strong labor market. Some predict that the U.S. unemployment rate could fall
below 3% at some point this year for the first time in some seven decades. On
Thursday, initial jobless claims fell more than expected, to just
166,000. Not everyone is worried. Mark
Haefele, chief investment officer at UBS
Global Wealth Management, wrote in a note to clients that he
expects a recession can be avoided: While we advise investors to build up
portfolio hedges, including commodities, and tilt toward value stocks to
manage a rising rate environment, our base case is for stocks to move higher,
and we forecast the US economy to grow by 3.5% this year and 2.4% in 2023. Investors may still want to buckle in for a
bumpy summer. Barron's Randall
W. Forsyth writes
that the May-to-November stretch before a midterm election has historically
been the weakest six-month period in the presidential cycle. He adds: The hoary phrase “Sell in May and go away”
sounds like something from the Farmer’s Almanac. But looking back to 1926,
the S&P 500 index has averaged just a 2.2% May-October total return in
the second year of a presidency, writes Doug Ramsey, Leuthold’s chief
investment officer, in the firm’s April report, known as the Green Book to
Wall Street pros. That made it the worst half-year for stocks. In stark
contrast, the subsequent November-April period, stretching into the third
year of a president’s term, was far and away the best, averaging a 13.9%
return. For investors looking to find into the ideal
window to buy, Randall has a few more words: "Just don’t jump through it
too soon." Watch our
weekly TV show on Fox Business Saturday or Sunday at 10 a.m. or 11:30 a.m.
ET. This week, an interview with Philadelphia Fed President Patrick Harker. |
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DJIA: +0.40% to 34,721.12 The Hot Stock: EPAM
Systems +10.3% Best Sector: Energy +2.8%
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