A weeks-long stock-market downtrend, combined with Friday’s jobs report, which showed an uptick in the unemployment rate, has fueled some investors’ recession fears. Those fears could have been overblown.
“Do we think there’s a recession? My answer to this question is no, there’s no recession,” Steven Ricchiuto, U.S. economist at Mizuho Americas, told MarketWatch. “This economy doesn’t have any of the preconditions for a recession.”
Ricchiuto noted that the U.S. economy isn’t dealing with things like an inventory overhang, an asset-liability mismatch, asset-price bubbles or systemic-credit-crunch risks. These sorts of things could lead to an economic shock that kickstarts a recession, but, as of right now, they aren’t threatening the economy.
Ricchiuto also noted that earnings growth didn’t justify the inflated stock valuations seen at this year’s peak.
“What’s going to fill in the valuation? The answer is probably nothing, but you don’t go into a recession. The correction probably takes on a new form which is a slower more sideways trajectory.”
The stock market sell-off was likely just a recalibration following the gains seen in the first half of 2024.
