Disappointing data does not signal new recession

ON NORTH AMERICA

PSigma's James Abate explains why recent negative data is transitory and symptomatic of a mid-cycle slowdown.

We place higher odds on the fact disappointing macroeconomic news that has negatively impacted markets will be transitory and indicative of a mid-cycle slowdown rather than the renewal of recession. This outcome could be rewarding as in past mid-cycle slowdowns, witnessed in 1995 and 1985, the S&P 500 rose over 30% as investors discounted a lull in economic activity and earnings and began to look toward the next peak. Recently released Q2 GDP numbers came in at a disappointing pace of 1.3% and Q1 GDP was revised down to a dismal 0.4%. Meanwhile, the US economy remains burdened with a ...