Will Europe Drag The US Into Recession?

Will Europe drag the US into recession?

European growth peaked at the end of 2017 and has been slowing ever since. Despite the ECB saying there is no recession in Europe, there is mounting evidence that Europe is entering a recession. Germany, which is often seen as the engine of the Eurozone, saw its GDP contract in the 3rd quarter and its manufacturing PMI fell below 50 in January. Italy has waived the white flag and is already in recession with the European Commission forecasting just 0.2 percent growth for 2019. The ECB just stopped its asset purchase program in December and now may have to try to stimulate again.

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european slowdown

While the US economic data has remained in growth mode, one wonders how long it can withstand slowing growth from abroad. It is only a matter of time until a European recession starts to affect S&P 500 earnings which are already forecast to decline in the 1Q thanks to tougher comparisons and margin pressures. Remember that the US doesn't have to be in a recession to have stocks move sharply lower. In the Internet/Tech bubble, stocks peaked in 2000 and fell dramatically well ahead of the recession arriving mid-2001.

Disclosure: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no ...

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