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Some investors have pointed to the recent correction in stocks as a warning of recession and a reason for the Fed back-off of its interest rate hiking cycle. Recessions are often accompanied by falling stock prices, but falling prices don’t guarantee economic contraction. There have been plenty of false positives throughout history.
While the jury is still out on whether the current stock market correction is a signal of recession, the coincident economic data continues to show economic strength. GDP is growing close to 3% according to the Atlanta Fed GDPNow forecast, industrial production is up close to 4% over the last year despite trade skirmishes, the unemployment rate is under 4%, and consumers appear to be in good financial shape.
The leading indicators look choppier, with two out of the last three months down, but the railroad sector which tends to be a good leading indicator of the economy points to continued strength.
As the WSJ reported today, the CEOs of two of the biggest rail firms in the U.S. are signaling the U.S. economy remains on solid footing.
CSX CEO Jim Foote said customers plan to ship more goods and are also moving ahead on long-term capital projects, including expanding facilities. “When you talk to the business people, they’ve always indicated that the economy was still in good shape,” Mr. Foote said in an interview last week…
“There are a number of overhangs that you could point to and worry about whether that could trigger a slowdown,” including trade effects and consumer sentiment shifting due to the government shutdown, Union Pacific CEO Lance Fritz said last week. But the railroad’s customers expect strong demand and shipments across a number of sectors, including construction materials, steel and plastics.
You can read the entire piece here.
Jeremy Jones, CFA
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