Recession? Really? Come on…: Morning Brief

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And just like that, everyone is a recession expert.

Two weeks ago, most self-proclaimed finance experts hadn’t uttered the word recession since it was fashionable in late 2022/early 2023.

From late July to early August, the prevailing sentiment of those seemingly in the know was 1) Nvidia (NVDA) shares were due for another 50% move after earnings on Aug. 28; 2) a 10% year-end rally for the S&P 500; and 3) a 100% move in Nvidia’s stock price in 2025.

Yet here we are, with the pros scaring the heck out of everyone the past week on the potential for a recession after a “bad” jobs report last Friday. Two top Wall Street banks raised their recession probabilities this week, for example.

These pros have voiced their concerns on TV, social media, and in research reports, but they also conveyed them to global trading desks. Markets were pushed into choppy seas as crowded AI trades such as AMD (AMD) have been dumped, with no nod to their underlying fundamentals.

All this recession talk feels like BS to me, an excuse to shake out the average investor so institutional players could get back into high-flying names at cheaper prices. Everyone does know that a recession often means negative economic growth, right? Or a significant slowdown in the economy that lasts quarters or even years?

So the US economy is going to go from 2.8% second quarter GDP growth and a long period of steady expansion to slightly negative growth or worse sometime within the next six months? An economy still creating a good clip of jobs each month is going to begin producing job losses in the near future?

Where is the evidence to support this? What’s the trigger for it? Don’t hit me up on X, formerly Twitter, and say it’s interest rates because the economy has been doing just fine during this high rate period.

Lost in recession BS this week was an ISM services report, which includes data on business activity, new orders, employment, and supplier deliveries. The index clocked in at 51.4%, up from 48.8% in June.

Numbers over 50% are seen as positive for the economy. Most companies in the report said business was either flat or expanding gradually.

Then, initial jobless claims totaled a seasonally adjusted 233,000 for the week — a drop of 17,000. The Street was looking for a print of around 240,000.

Corporate earnings season has gone quite well too. The majority of well-known public companies are easily beating sales and profit forecasts, not shocking the masses with giant misses. Outlooks have been solid.

That’s recessionary? Come on!

Now, I am not going to sit here and blow smoke and say everything is peachy. Many households are struggling to make ends meet because of sticky inflation, something I was reminded of when chatting with P&G’s (PG) CEO Jon Moeller a week ago.

I think the interview by Yahoo Finance’s Brooke DiPalma at the NYSE with Dine Brands (DIN) CEO John Peyton was also eye-opening on this front.

“It’s a value war. It’s a fight for share of wallet. … At a time when our target guest is dining out less, we have to make sure that when they do choose to dine out — IHOP or Applebee’s or Fuzzy’s are their first choice,” Peyton said.

The same goes for DiPalma’s exclusive interview with Molson Coors (TAP) CEO Gavin Hattersley.

“Consumers [are] making different pack sizes choices,” Hattersley said. He said this behavior has been going on “for a while” and is “pretty consistent through through Q2.”

Conversations I had this past week with top leaders further shed light on these macro challenges.

Disney (DIS) CFO Hugh Johnston told me demand at its theme parks tailed off in the final few weeks of the quarter. The company sees this slowdown persisting for the next few quarters.

“We certainly see consumers behaving in a way — I wouldn’t call it recessionary necessarily — they’re watching their pennies a little bit more,” Johnston said. Lost in the sauce, though, was a strong quarter for Disney’s streaming businesses. In a recession, people usually cut unnecessary expenses.

Ralph Lauren (RL) CEO Patrice Louvet told me (video above) this when I asked him if the consumer is behaving recessionary: “I think it’s pretty clear wherever you look that the overall consumer is being pressured by the cumulative effect of inflationary pressures and interest rates. As far as our core consumer is concerned, we actually find them to be very resilient.”

The company still notched sales growth in its North American stores.

All in all, you don’t get the sense the economy has already jumped over a cliff and is falling to the ground. As a result, it’s hard to justify some of these severe down days we have witnessed in markets this week.

What appears to be unfolding is a gradual cooling in the economy that could prove short-lived, especially if the Fed cuts rates, as Cognizant (CTSH) CEO Ravi Kumar told me on my Opening Bid podcast this week.

Labor market developments of late “seem more consistent with post-reopening normalization and gradual rates drag than any current shock or accelerating weakness but the risk is present,” said 22V Research strategist Peter Williams in a note this week.

I think that’s a fair assessment. What’s not fair is all this recession hysteria talk.

Three times each week, I field insight-filled conversations with the biggest names in business and markets on my Opening Bid podcast. Find more episodes on our video hub. Watch on your preferred streaming service. Or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.

In the below Opening Bid episode, Trump’s former nominee to the Federal Reserve Judy Shelton shares why the Fed should be focused on 0% inflation.

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