{"id":33119,"date":"2023-07-08T16:03:56","date_gmt":"2023-07-08T20:03:56","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/rolling-recession-turns-to-rolling-expansion-says-top-wall-street-economist\/"},"modified":"2023-07-08T16:03:58","modified_gmt":"2023-07-08T20:03:58","slug":"rolling-recession-turns-to-rolling-expansion-says-top-wall-street-economist","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=33119","title":{"rendered":"\u2018Rolling recession\u2019 turns to \u2018rolling expansion,\u2019 says top Wall Street economist"},"content":{"rendered":"
\n

A \u201crolling recession\u201d has turned into a \u201crolling expansion\u201d that indicates stocks could be set to see a 2023 rally continue and broaden out beyond megacap tech shares in the second half of the year, according to a closely followed Wall Street economist.<\/p>\n

\u201cTo assess whether we\u2019re having a rolling expansion is as well as to look at those industries and sectors that have been depressed. They\u2019re showing signs of recovering,\u201d Ed Yardeni, president of Yardeni Research, said in a phone interview Friday afternoon.<\/p>\n

\n

Yardeni pointed to the housing sector. Last year\u2019s rate shock \u2014 with the Federal Reserve embarking on a hiking cycle that lifted the fed-funds rate from near zero in March 2022 to 5% to 5.25% this spring \u2014 knocked single-family housing hard as mortgage rates soared.<\/p>\n

But the sector has recovered smartly as homeowners have proven reluctant to sell, constraining supply. Pent-up demand has fueled strength in the sector \u2014 and for home builders \u2014 despite mortgage rates that have risen toward 7%.<\/p>\n

Read:<\/strong> Homebuilder ETF outperforms S&P 500, industry\u2019s stocks still \u2018cheap\u2019 in 2023 market rally<\/p>\n

From there, the expansion appears to be rolling toward the manufacturing sector, Yardeni said. Retailers appear to have made progress working off a glut of inventories that built up in late 2022 and early 2023 after over-ordering amid the earlier supply-chain disruptions. He expects coming purchasing managers index readings to soon begin showing signs of a bottom.<\/p>\n

The sun won\u2019t cast its rays on everything, however, Yardeni sees pain ahead for commercial real estate, but expects it to be confined largely to old office buildings.<\/p>\n

\u201cMalls, hotels and warehouses \u2014 those areas of the economy won\u2019t be expanding in a major way, but they won\u2019t be contracting either,\u201d he said.<\/p>\n

It\u2019s a scenario in which the overall economy should be able to continue to moderate without falling into recession, Yardeni said. As defined by the National Bureau of Economic Research, a recession involves a significant decline in economic activity that is spread across the economy and lasts more than a few months.<\/p>\n

Investor expectations for a recession have waxed and waned in 2023. The collapse of Silicon Valley Bank and other regional lenders in March sparked fears of a credit crunch that would accelerate the economy\u2019s fall into recession as lagging effects of the Federal Reserve\u2019s breakneck series of rate increases that began in March 2022 hit the economy.<\/p>\n

A labor market that\u2019s shown some signs of cooling but remains hot by historical standards \u2014 and resilient consumer spending \u2014 is reducing fears of an imminent recession. Analysts say fading recession fears have helped the stock market continue a 2023 rally that saw the S&P 500
\n SPX,
\n -0.29%<\/bg-quote>
\n rise nearly 16% in the first half.<\/p>\n

See:<\/strong> Recession canceled? U.S. stock market \u2018pretty frothy\u2019 after S&P 500\u2019s strongest first half since 2019<\/p>\n

Consumers still have firepower, he said. Stronger interest income, while dividend income, rental income and proprietors income are all at record highs, he noted. \u201cAnd on top of that, Social Security payments are at an all-time record high,\u201d Yardeni noted.<\/p>\n

Yardeni, meanwhile, had argued that the economy had suffered the aforementioned rolling recession, which he now sees giving way to the rolling expansion.<\/p>\n

Worries the Fed will need to keep jacking up rates beyond what investors or policy makers currently expect. Most of the inflation story appears to have been driven by shock waves from the pandemic, he said, which means the Fed doesn\u2019t need a recession to see inflation moderate. In fact, there may even be signs of \u201crolling disinflation,\u201d he said, with goods inflation nearing zero, durable-goods inflation turning negative and nondurable food and energy prices falling significantly, while services inflation persists.<\/p>\n

A rolling expansion should allow the stock market rally to broaden out in the second half of 2023. Gains have been concentrated in megacap tech stocks, with a \u201cmagnificent seven\u201d coterie of shares accounting for nearly all the S&P 500\u2019s gains. <\/p>\n

Need to Know: <\/strong>These stocks could be the next Magnificent Seven market leaders, says Goldman Sachs<\/p>\n

Indeed, the average stock has lagged behind. An equalweight measure of the S&P 500, which as the name implies weighs each component equally instead of by market capitalization, was up just 6% in the first half. The more cyclically oriented Dow Jones Industrial Average
\n DJIA,
\n -0.55%<\/bg-quote>
\n rose just 3.8%.<\/p>\n

\u201cObviously, the leaders are becoming increasingly pricey,\u201d Yardeni said.<\/p>\n

But artificial intelligence is sparking a new industrial revolution that has yet to play out. Investors will get excited about companies that aren\u2019t necessarily making technology but using it to become more productive, he said.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A \u201crolling recession\u201d has turned into a \u201crolling expansion\u201d that indicates stocks could be set to see a 2023 rally continue and broaden out beyond megacap tech shares in the second half of the year, according to a closely followed Wall Street economist. \u201cTo assess whether we\u2019re having a rolling expansion is as well as […]<\/p>\n","protected":false},"author":1,"featured_media":33120,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-33119","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\n\u2018Rolling recession\u2019 turns to \u2018rolling expansion,\u2019 says top Wall Street economist | iFintechWorld<\/title>\n<meta name=\"description\" content=\"A \u201crolling recession\u201d has turned into a \u201crolling 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