Stocks Rally After Turbulent Week

It was another extremely volatile week for both the stock and bond markets. Stocks rallied Thursday and Friday after large declines on Wednesday.

Some of the issues that have fueled the recent volatility have been:

1) The rapid decline in interest rates.

2) Very poor economic data out of countries like Germany and China.

3) Uncertainty around President Trump's recent tariff announcements.

All of these developments will need to be closely monitored as all three have the potential to create challenges for markets and the economy. I will have a video out next week going into more detail.

That being said, there was a lot of reporting this week that the U.S. is likely heading into a recession. We still believe it is highly unlikely the U.S. will enter a recession in the near-term.

While the U.S. economy is slowing it is still doing well led by a very strong U.S. consumer. And the consumer should be strong with a very robust jobs market and good wage growth.

Also, small business owner confidence increased in July and is not far from all-time highs. A few lines from the report from the NFIB:

“While many are talking about a slowing economy and possible signs of a recession, the 3rd largest economy in the world continues to defy expectations, generating output, creating value, and expanding the economy,” said NFIB President and CEO Juanita D. Duggan. “Small business owners want to grow their operations, and the only thing stopping them is finding qualified workers.”

“Contrary to the narrative about impending economic doom, the small business sector remains exceptional. This month’s index is a confirmation that small business owners remain very optimistic about the economy but are being hamstrung by not finding the workers they need,” said NFIB Chief Economist William Dunkelberg.

With the U.S. consumer doing well and small businesses feeling optimistic the U.S. economy is on firm footing. However, the U.S. is not an island and there has been an impact to the U.S. from negative interest rates around the globe and very weak global growth. Also, the concerns surrounding President Trump’s recent tariff announcements is going to be a drag on growth. We will have more on all of this next week.