Markets Drop for 7th Straight Week on Recession Fears

The Dow (-2.8%), NASDAQ (-3.8%), and S&P 500 (-3.0%) each ended the week deep in negative territory, extending the stock market’s losing streak to seven weeks.  Meanwhile, taxable bonds saw relief for the 2nd straight week, gaining about 0.5% unlike their tax-free municipal counterparts that lost another 0.5%, despite seeing some gains on Friday.  The theme has not changed – it’s all about inflation, and the Fed’s policy to aggressively raise interest rates in their attempt to thwart inflation.  At this point, there seems to be a tug-of-war between optimistic and pessimistic economists – will the Fed’s policy drive the US into a recession?  Right now, the “yes” vote is about 60% and the “no” vote about 40%.  This tug of war was also seen last week, as the two major retailer companies – Walmart and Target – missed earnings expectations, signaling a slowing of the economy in the 1st quarter.  Yet, April’s consumer spending increased.  That’s like speaking from both sides of your mouth!

I am neither an optimist nor a pessimist.  I just report what I see, and I see conflicting data.  Most current data is lousy compared to where we have been during our huge economic expansion, but it’s still not bad overall.  Let me leave you with one piece of data to offer some hope.  Since World War II over 75 years ago, there have been 12 occasions that the markets were up over 20% (2021) followed by the market being down to start the following year.  During each of those 12 occasions, the markets finished that year in positive territory.  Will history repeat itself?  I certainly hope so, but we have over seven months to go until we know for sure.

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