There is a recession over on Wall St. Bank where brokerage stocks are down 50% and losses keep mounting. But, a great majority of businesses in the US and Europe are not seeing much of a slowdown. Earnings reports from companies like Microsoft (MSFT) and Procter & Gamble (PG) has been upbeat about this year.
According to the FT "in recent months, as a litany of poor data, tales of woe from the financial sector and reports of belt-tightening consumers prompted expert after expert to predict the first US recession in almost a decade, businesses have begged to differ."
If the views of these companies are accurate, the economy in the US could be split into two entirely different parts. Which of the parts prevails will determine whether the economy turns down. In the one corner are financial companies, auto operations, and housing-related industries. Each has a good reason to be in trouble but those reasons may be contained within the parts of the economy in which those corporations operation.
In the other corner are many big tech companies, conglomerates which have large industrial and infrastructure customers bases, multinational which have business in Asia, media firms, and consumer goods companies which sell a broad range of inexpensive products.
It is a tug-of-war now. If the consumer feels more poor than he has in the past, keeping out of a recession will be difficult. But, the earnings at a huge percentage of big US companies may not be hurt much, and that alone could make a downturn short and less severe than many fear.
Douglas A. McIntyre
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