MOSCOW – Between rate hikes and high inflation, the newly released GDP numbers indicate the U.S is currently in a recession, however, Edward Jones Financial Advisor Beau Melton, explained there are a plethora of factors to take into consideration other than simply the word “recession”.
When many individuals hear the word recession, they think back to 2008 and fill with fear, however, this instance is far different. A recession is caused simply when there are two consecutive quarters of negative GDP growth.
“Compared to the past recessions, we are entering this period with a strong economic stance,” Melton said. “There are issues that are causing the GDP to contract, however, at this point in time, we are in a much better position than 2008.”
The market is forward-looking and has already predicted and priced in the start of this period of contracting growth. Melton explained that the market even ended on a positive for the day after the GDP numbers were released. If this incident was not already priced in, the market likely would have seen a drop.
The same goes for the .75% interest rate hikes implemented by the Federal Reserve on Wednesday, July 27. The market took the increase exceptionally well because it anticipated it coming.
“The market was expecting the .75% raise,” Melton said. “Considering the Fed didn’t go further than the expectation, we saw a positive day.”
Recovery from the dramatic economic events in the past few years will not be instantaneous. The stock market’s performance heavily stems from investor sentiment. When individuals begin putting more money back into the market, it will go up.
Melton predicts the market will likely see recovery in a ‘U’ shape instead of a ‘V’. This means recovery will take more time than other downturns such as March of 2020, however, the market will eventually recover.
In the month of July, the market has jumped back roughly 8% thus far showing the slow climb out could potentially already be in motion.
For more information, call Edward Jones Financial Advisor Beau Melton at (208) 882-1234 or walk into his office at 609 S Washington St, Suite 203 Moscow, Idaho 83843.