top of page

Market Down / Economy Sound | Crouch Connection, January 2019


Santa’s sleigh is usually pulled by reindeer. This year, it looks as if it were pulled by a team of bears. With the Dow Jones Industrial Average down 8.7% this past month, this was the worst December since 1931.

As Barron’s said this week, “While government shutdowns and cabinet resignations make for good headlines, there is only one thing that gets the market to slide like that: recession fears, in this case exacerbated by a Federal Reserve that seems to acknowledge that possibility.” So, is a recession in our immediate future?


In her December 14 “Economic Perspective”, TD Bank Chief Economist Beata Caranci borrowed the quote from President Franklin Roosevelt’s inaugural address to make an important point:

Even though “financial and economic indicators have yet to breach levels that would signal an impending recession…the only thing we have to fear is fear itself.” She goes on… traditional market indicators, both financial and economic, do not indicate any danger of an imminent recession, “However, beliefs and sentiment create outcomes. Business investment intentions become more cautious, and we risk having a prophesy be fulfilled by behavior adjustments, particularly if households respond in a similar fashion.”

One of my favorite economic prognosticators is Fred Smith, the colorful CEO of FedEX Corporation. In his conference call, also on December 14, he said:

“FedEx is experiencing strong growth in the U. S. where the economy remains solid. However, our international business, especially in Europe weakened significantly since we last talked to you during our earnings call in September. In addition, China’s economy has weakened due in part to trade disputes.”

FedEx CFO Raj Subramaniam continues:

“In the U. S., growth remains solid driven by robust consumer spending and favorable conditions in the industrial sector. The secular slowdown in the Chinese economy has been exacerbated by trade tensions. Spillover effects from these tensions and the fading tech cycle have negatively impacted growth throughout Asia.”

Bottom line…we believe the U. S. economy remains solid.


Two things, in our view, could turn a perfectly healthy economy into a recession:

  1. A tone-deaf Federal Reserve that continues to ignore the deafening signals from the market – signals which indicate that the interest rate hikes are too much for an economy still fragile from the Great Recession and its aftershocks. Hopefully the four new voting members who take their seats at the Federal Reserve after the first of the year will swing the Fed back to a more accommodative and supportive stance.

  2. A negative media finally convinces the American public to quit spending their generally healthy incomes and save for a rainy day. In general, that is probably good advice, but when all of us become fearful at once and slow our spending collectively, the economy does slow down. So far, we haven’t seen signs of that.

That said, negative expectations have the potential to become self-fulfilling. For now, I believe the only thing we have to fear is fear itself (and the Fed).


According to, the latest CNBC Millionaire Survey shows that even as volatility spiked in the period since September, wealthy Americans are not making major changes to their portfolios. Their portfolios look similar to the classic 60-40 investment plan (60% equities/40% bonds). Reporter Eric Rosenbaum observes, we think correctly, that

“Investors who have constructed a diversified investment plan based on their financial situation and risk tolerance are not going to “run for cover” when the market doesn’t go in their direction.”

Although there are times to “lean in” or “lean away” from the market, making extreme moves in response to market volatility is almost always the wrong thing to do. We believe that staying invested will pay off, although investors should expect more volatility. Growth may be slowing, but we don’t expect a recession, particularly one as severe as the market seems to be expecting.


We will close with the well-worn Warren Buffett quote:

“We simply attempt to be fearful when others are greedy and to be greedy when others are fearful.”

And from “Barron’s” this week:

“The third year of a presidential cycle has been positive for the Dow in all but one instance in the past eight decades: 1939, at the outset of WWII, when it dropped 2. 9%”

As we always remind you, please call if you need any reassurance that your portfolio is positioned to meet your financial needs. We always enjoy your calls.


Dave Crouch Kim Blackburn Kay O’Connell

Registered Principal Branch Operations Manager Research Assistant

Financial Advisor Financial Advisor

Opinions expressed in the attached article are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts mentioned will occur. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Holding investments for the long term does not insure a profitable outcome. No investment strategy can guarantee success. Investing involves risk and you may incur a profit or loss regardless of strategy selected.


Featured Posts
Recent Posts
Search By Tags
Follow Us
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square
bottom of page