Weekly Market Commentary 1/11/2019

Following a vigorous rally this week, the stock market is on the cusp of leaving correction territory, clawing back nearly half of the near-20% drop in the S&P 500 index since September 21. Likewise, bond yields bounced back from their lows reached a week ago, with the 10-year Treasury yield moving up from 3.55% to 3.75% on Thursday before slipping back to 3.70% at week’s end. Do these moves in financial assets mean that perceptions of the economic outlook have improved? Not likely. Indeed, the latest Wall Street Journal poll of economists placed the odds of a recession over the next twelve months at 25%. That’s up from 17.6% in the early-October survey, just as the stock market rout was getting underway. True, the most important barometer of the economy’s health, job growth, came in much stronger than expected over the final two months of the year. If not for the blockbuster December employment report, recession fears might have been even higher in the WSJ survey, which was taken between January 4 and 8.