Is the U.S. Economy Heading for Recession in 2016?
According to multiple news sources America is starting the New Year in precarious fashion as several credible economic analysts predict recession in 2016. Evidence of this anxiety is easily demonstrated by the recent and substantial drop in various stock market indices. As of today NASDAQ retracted to its approximate valuation as measured this time one year ago.
Fears the global marketplace is facing an impeding hard contraction are growing. In fact Andrew Roberts, credit chief at RBS, was recently quoted as saying “sell everything except for high-quality bonds” because “this is about return of capital, not return on capital…in a crowded hall, exist doors are small”.
Although some people have been quick to point fingers at China’s currency devaluation and GDP growth slowdown as a primary cause for a potential U.S. downturn, others are quick to highlight the second largest country in the world as measured by GDP is merely one cog in the global market wheel. In other words this problem is much larger and more confusing to comprehend than just focusing on China’s issues. As evidence CNBC recently reported a “steep decline” in “IMF Global Exports” for 2015.
Despite the Federal Reserve raising the federal funds rate in December 2015, a decision based on reassuring data the U.S. economy is moving in the right direction, the Fed did concede “conditions can change quickly” and “while the steps to improve data taken so far will help, gaps will remain, especially in regard to unregulated or weakly regulated entities”. Given this conditional response one must ponder how exposed is American prosperity to unregulated or weakly regulated entities with respect to global marketplace influences.
Conclusion: Be careful investing your hard earned dollars in 2016 because at this point, given various headlines both domestic and abroad, the process of analyzing risk versus reward for most investment vehicles just became extremely difficult if not impossible to calculate, especially in light of a conceivable U.S. recession in 2016.