Mullets and machine-learning? Today’s economy harkens back to 1986
Main U.S. indexes slightly green; S&P 500 out front, up ~0.3%
Energy leads S&P 500 sector gainers; Tech, Healthcare slip
Euro STOXX 600 index up ~0.3%
Dollar ~flat; gold, bitcoin edge up; crude dips
U.S. 10-Year Treasury yield rises to ~3.78%
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MULLETS AND MACHINE-LEARNING? TODAY’S ECONOMY HARKENS BACK TO 1986
The U.S. economy is facing similar conditions to 1986, a year of shoulder pads, acid washed jeans and questionable hairstyles, and that may mean that a recession is still several years away, according to Barclays Capital.
“Finding historical parallels for today's US economy by identifying periods closest to current conditions for inflation, interest rates, unemployment, growth, and stocks suggests that the closest historical equivalent to today is February 1986,” analysts Renate Marold, Josh Grasso and Ryan Preclaw said in a report.
At that time, growth was roughly flat, consumer prices were falling, the Federal Reserve had just cut rates by 50 basis points and stocks had gained around 25% in 12 months. “All but the jobs picture looked similar,” they noted.
Based on this, the U.S. economy may see a “very soft landing” over the coming year, with growth staying steady, headline inflation and unemployment trending lower and stocks rising. “Only after that point would things get trickier, with the labor market tightening and inflation ultimately edging higher, forcing the Fed to reverse course.”
Less rosy scenarios remain a risk, however. The economy shows some similarities to May 1990 and June 2007, “when nasty recessions were right around the corner.” The outlook in these cases suggest that unemployment could jump, inflation and growth decline and stocks drop.
(Karen Brettell)
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FOR MONDAY'S EARLIER LIVE MARKETS POSTS:
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GOLD SHINES BRIGHT, BUT FACES BIG BARRIER ON THE CHARTS - CLICK HERE
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DRAGHI’S PLAN IS DESIGNED FOR GERMANY – TS LOMBARD - CLICK HERE
DEFENSIVES HELP THE STOXX, LUXURY DOWN - CLICK HERE
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COUNTING ON MORE RATE CUTS CLICK HERE
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