US recession looming?

In the wake of The Fed’s ill-advised rate hike , speculation is growing about a US recession in 2016.

But is this probable? Yes. Parts of the US economy, for example, energy, are already in recession. Meanwhile, the US economy is already slowing and sharply.

Keep in mind that higher interest rates, theoretically, translate into a stronger currency (via covered interest rate arbitrage. As the chart below shows, American exporters are already suffering as the US Dollar strengthens. The red line shows the relative strength of the US Dollar compared to a basket of America’s most important trading partners. The black line shows US exports of good and services. Its clearly falling as the US Dollar advances.

And this recovery is already one of the longest on record. How long can it continue? Some argue not much longer.

While I personally believe the next recession might be very severe, others suggest you should be buying stocks now.



Comments are closed.