Worries over a looming U.S. recession have bubbled up after this month's wild stock-market swings and surge in U.S. bond yields.
Ray Dalio, founder of the hedge fund Bridgewater Associates LP, is among the investors who have warned of an economic downturn, writing in a LinkedIn post Monday that "the risks of a recession in the next 18-24 months are rising."
But as the The Wall Street Journal's Morning MoneyBeat newsletter noted Wednesday, others, including economists at S&P Global Ratings, say there is little reason to fret for now.
The firm pegged the odds of the U.S. slipping into recession over the next year at 10% to 15% in a report released Tuesday. That's down from 15% to 20% in November, before this month's global stock rout spurred concerns about the U.S. economic expansion.
S&P thinks the nearly-nine-year old stretch of U.S. economic growth will extend for at least another year to become the longest-ever U.S. expansion.
"The general tone of recent economic data remains broadly upbeat," said S&P. "Barring a shock, this expansion has staying power."
S&P cautioned that a prolonged stock market slide could become a catalyst for an economic slowdown, and many analysts say it's unclear if last week's stock plunge has fully run its course.
Still, a recent report from Goldman Sachs shows there's little historical precedent to suggest stock corrections lead to broader economic downturns. The bank said fewer than a third of stock-market corrections over the past four decades coincided with a U.S. recession.
"Most equity market corrections recover without developing into bear markets or presaging recessions," Goldman analysts wrote.
Another reason for optimism: U.S. stocks' 6% slide this month has helped bring down measures of valuation that many feared were growing stretched. Other market imbalances that had been worrying investors and policymakers–including depressed long-term bond yields and unusually placid markets–have reversed.
The so-called yield curve, which measures the gap between short and long-term Treasury yields, has been steepening in recent weeks. That is typically a sign that investors are becoming more optimistic about longer-term U.S. growth prospects.
"This suggests a shrinking recession risk rather than a growing one," said RBC Global Asset Management in a recent note.
|For more news you can use to help guide your financial life, visit our Insights page.|