Markets have been rallying since the Great Recession of 2008 and given that the average recession takes place – on an average of every 8 years – since the end of WWII in 1945, we are overdue for economic weakness. However, the current state of markets is driven by wealth is being created, jobs are plentiful and wages are rising, even if there are flashing signals of an upcoming and somewhat overdue recession.
Examples of an upcoming recession are of course the inverted yield-curve in bond markets, lower corporate profits, shipping lines reporting less traffic, and GDP fading from about 3.0% at the start of 2019 to about 2.0 or less expected in Q4 of 2019. Keep in mind that the ongoing trade war with China is hurting the economy but we do not know how much. Still, for now equity markets are positive snd rallying and this rally could continue throughout September and into November.
Sure, if the US slips into recession equity markets will take hit, but with possible rate cuts from the Fed and robust consume spending, at least for now, equity markets look solid.