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<\/a><\/p>\nRECESSION THREAT<\/p>\n
Gene Epstein writes in this week’s Barron’s about the threat of a recession. In each of the six previous recessions, there was a spike in crude prices before the onset of a recession. There is no case of a recession when crude prices were falling as they are currently.<\/p>\n
Of course, the threat in this case is that falling crude prices will lead to a wave of defaults impacting banks and high yield bonds. According to Carsen Valgreen of Applied Global Macro Research, these types of loans amount to less than 4% of the banks’ total loan book. So even if half of these loans go bad, it should not be enough to set off a banking crisis.<\/p>\n The US economy continues on its slow growth path, while economic conditions might be on a more slippery footing overseas. According to Michael Lewis, economics chief at Free Market, “in the modern era, there is not a single recession that can be traced to foreign economic woes.”<\/p>\n Epstein concludes that we should be able to avoid a recession, albeit with subpar growth.<\/p>\n OIL<\/p>\n The market was helped by some talk that OPEC members were in discussion to limit production to get the price of oil under control.<\/p>\n HOME BUILDER SENTIMENT<\/p>\n Home builder sentiment fell to its lowest level since May.\u00a0\u00a0Time will tell if we have seen the peak in sentiment. In the past, peaks in home builder sentiment often preceded a downturn in the overall business cycle by at least two years.<\/p>\n LEADING ECONOMIC INDICATORS<\/p>\n The Leading Economic Index fell 0.2% in January, marking the second straight decline. Four of ten LEI components declined. But the six-month smoothed LEI number increased. An alternate leading index, made up of the difference between the Coincident Index and the Lagging Index, increased by 0.2%.<\/p>\n JOBLESS CLAIMS<\/p>\n Jobless claims fell again, to 262,000. This is the lowest level in three months.<\/p>\n INDUSTRIAL PRODUCTION\/CAPACITY UTILIZATION<\/p>\n Industrial production was up 0.9% in January. This was the first gain in four months and the most since November 2014. Manufacturing output was up 0.5% and the capacity utilization rate increased to 77.1% from 76.4%. These increases show signs that the industrial and manufacturing sector are beginning to stabilize, thereby reducing the near term risk of recession.<\/p>\n HOUSING<\/p>\n Housing starts dropped 3.8% in January. Snowstorms in the northeast might have impacted the number.<\/p>\n","protected":false},"excerpt":{"rendered":" The market picked up where it left off on Friday and put together back to back +1% gains on Monday and Tuesday. For the week, the overall US stock market was up 3.12% (VTI), the SP500 (SPY) was up 2.87% … Continue reading ![\"oil](\"https:\/\/envisionco.net\/wp-content\/uploads\/2016\/02\/oil-shocks-barrons-2-19-2016-300x199.png\")
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