Coming into the year, financial pundits’ recession warnings led news feeds. Oops.
We are halfway through the year, and unless the smoke from the Canadian forest fires has completely clouded our vision, there’s no recession in sight. The economy (measured by gross domestic product, or GDP) grew at a 2.0% annual pace in the first quarter—up materially from the initial estimate of a 1.3% growth rate, marking the third straight up quarter in a row. Strong consumer spending on everything from durable goods (think refrigerators and cars) to services drove the upward revision.
You can argue that GDP is a backward-looking measure, but consumers continue to spend, the jobs market is solid and even the housing market is showing signs of resilience—new home sales rose double digits in May and were up 20% above year-ago numbers, for example.
Yes. I was among the ranks warning of a possible recession, but frankly I’m more than happy that my recession forecast has proved, so far, to be wrong. Why? Because recessions are painful, and I didn’t make big bets with my Portfolios on that recession prediction. (I’ll have more comments on their performance in a minute.)
While everyone was worried about a recession out of the gates, it was the debt ceiling debate that captured investors’ (and traders’) attention for a good portion of the first half of the year. But even that game of political chicken wasn’t enough to derail the markets.