Kevin Gordon, Charles Schwab senior investment strategist, and Cameron Dawson, NewEdge Wealth chief investment officer, join ‘Closing Bell’ to discuss what’s priced into the markets, Wednesday’s price action and more. For access to live and exclusive video from CNBC subscribe to CNBC PRO:
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BREAKING: Recession News
LEARN MORE ABOUT: Bank Failures
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As the global economy continues to grapple with the ongoing COVID-19 pandemic, there is growing concern among experts that markets are not adequately pricing in the possibility of an impending recession. According to Tom Dawson, the Chief Investment Officer at NewEdge Wealth, there are several factors contributing to this worrying trend.
Dawson points out that despite the severity of the crisis and the significant economic downturn experienced in various sectors, stock markets have shown astonishing resilience. This disconnect between the real economy and the financial markets is puzzling, as traditional indicators suggest that a recession is looming. High unemployment rates, dwindling consumer spending, and a decline in corporate earnings all indicate a slowdown in economic activity, yet stock prices remain buoyant.
One reason for this disparity, as Dawson explains, is the unprecedented monetary and fiscal stimulus measures implemented by governments and central banks around the world. These measures, aimed at cushioning the impact of the pandemic, have flooded markets with liquidity and propped up asset prices. The abundance of cheap money has lured investors to take on higher risks, creating a “risk-on” environment where even bad news is seemingly shrugged off.
Additionally, Dawson highlights the role of technological advancements and shifts in investor behavior that may be distorting market perceptions. The rise of algorithmic trading and the dominance of passive investing have contributed to the detachment between financial markets and economic fundamentals. As more and more investors rely on complex algorithms and index-tracking funds, it becomes easier for market sentiment and momentum to overshadow rational decision-making.
Moreover, Dawson emphasizes that the lack of visibility regarding the future trajectory of the virus and the potential long-term economic consequences further clouds market outlooks. As governments struggle to contain the spread of the virus and researchers race to develop an effective vaccine, uncertainty persists. This uncertainty is undoubtedly reflecting in the cautious stance of many investors, yet it has not translated into a significant correction in the markets.
The consequences of the markets not pricing in a recession could be significant. If, indeed, a recession is on the horizon and markets continue to remain detached from reality, the eventual correction could be severe, potentially leading to a crash similar to the 2008 financial crisis. Furthermore, the mispricing of assets could create a false sense of security among investors, prompting them to take on even greater risks and exacerbating economic instability.
In conclusion, the current disconnect between markets and the real economy is a cause for concern. Despite the overwhelming evidence pointing towards an imminent recession, factors such as unprecedented stimulus measures, technological advancements, and ongoing uncertainty have contributed to markets remaining seemingly unfazed. As the global economy grapples with the challenges posed by the pandemic, it is crucial for investors and policymakers to heed the warnings and ensure that markets adequately reflect the prevailing economic realities. Failing to do so could have far-reaching consequences for financial stability and the overall health of the global economy.
They lie they been knowing how do you have 0% interest rates since Obama era?!?!
It was a very bad decision to remove the Glass-Steagall Act in the late 1990s, which led to the spectacular failure of huge banks during the financial crisis of 2007–2008. To prevent another disaster, Dodd-Frank and this statute both need to be reestablished right away. What happened with SVB is only the beginning of what will happen if nothing is done to address the current situation.
Baked in, temporary negative, chill out and stay long.
Who else is feeling the heat of the economy and the unpredictable stock market? Raises hand Yep, that's me with my $730k portfolio made up of bonds and stocks. I've been tossing and turning at night wondering if it's time to liquidate and flee for the hills. Anyone else in the same boat?
2022 Nasdaq down 37.8% at the lows but recession not priced in like wtf. Unless there is another black swan event like the financial crisis what justifies a larger drop?
Thanks for the update. <I will advise traders, especially newbies, to have an orientation of the market before getting involved. I must say trading offers more benefits than just holding, thanks to Ryan Donald for always keeping me ahead of the trend, so glad I started the program with him.
The way I see it this recession most likely has an external cause. The United States is losing influence as a federal currency for the first time in decades. They don't have any more economies to utilize to control their inflation, and less money is being spent on stock and oil trading than previously. They all lend credence to the hypothesis that a new multilateral world order may be in the works.
If you say so, sweetheart.
I dont think there will be a major recession. Just a slow down in economy because people know feds will start cutting interest rate next year because these they will be shooting themselves in their foot if they wont.
These "experts" are not going to be happy until they get the recession they have been predicting for 2 years now. And odds are they will finally see a recession, just because they happen every once in a while no matter what.
i love these people lol
14 years of record low interest rates by every Central Bank on earth and it isnt a recession! 0% interest rates are now the norm, Party on Garth!
Currently I'm just being smart and frugal with my money, I'm in the green 47% over the last 13 months and l've accumulated over $700K in pure profits from DCA’ing into stocks, ETFs, dividends and futures. However I’ve been in the red for a while now. I work hard for my money, so investing is making me a nervous sad wreck. I don’t know if I should sell everything, sit and just wait.
Thanks for the amazing information, this is not and her amazing exploits, I'll definitely connect with her soonest
She needs her own show!
Makeup stocks. Buy them.
Down down
Market recession was priced in in October
Even though I plan to stick with it, inflation is wasting my money and my portfolio is losing gains ever day, so I need a cure right away. My main concern is how to raise the value of my cash reserves because it has been lying there for a very long time with little to no increases and inflation is currently about 10%.
^^^
Maybe some of these analysists need to go on unemployment. Please help the cause! Thank you dear overpaid analysts.