These recession fears the market has been ranting and raving about for over a year now are getting firmer and more valid. 

Monday, UBS Chief Investment Officer of Global Wealth Management Mark Haefele wrote in a note "Risks of a recession are higher given the escalation of the US-China trade dispute." In a note out last week, Haefele said if all the currently threatened tariffs to go into effect December 15, on both sides, materialize, U.S. growth will "tip" to the "brink" of recession. 

Many economists are looking for GDP growth to decelerate to to below 2%. Recently, the ISM manufacturing index showed a contraction year-over-year in manufacturing activity for the month of July. And it isn't just the incremental few basis points shaved off of GDP with lower demand as a result of higher prices from tariffs that could do the trick. Business sentiment is low. With less money spent on capital expenditures comes less hiring, which means less consumer spending. Many refer to the consumer as "strong" for the moment, but that could change quickly. 

Recently, Stifel's Head of Institutional Equity Strategy Barry Bannister sad the inverted yield curve (3 month treasury and 10 year treasury) indicates a May 2020 recession and December 2019 stocks market sell-off. 

Yes, President Trump has made it explicitly clear he intends to meet with Chinese leader Xi Jinping in October, which boosted sentiment in the U.S, sending the S&P 500 to a now 18.7% year-to-date gain. But veteran stock trader Sarge Guilfoyle of RealMoney told TheStreet last week "You're seeing risk-on based on keyword reading algorithms that lead momentum bots [robots]." He added, "We will almost always overshoot on news events one way or the other and Thursday's big news event was China and the US agreeing to meet sometime in mid October."

Now, the average forward one-year price-to-earnings multiple is up near 18, higher than the five-year average and far higher than the 10-year average of 14.8. Meanwhile, LPL Financial wrote in a note out at the end of August they now expect S&P 500 earnings in 2020 to slow to $175, down from a previous estimate closer to $180. LPL had been relatively bullish compared to other market participants, but is now seeing heightened risk of a recession in the "latter half" of 2020. 

Positively, the 10 year treasury rose Monday to 1.63%. Still, that's way down from earlier in 2019, easily reflecting two Federal Reserve interest rate cuts. Haefele recommends buying TIPS (treasury inflation protecting securities), or treasury bonds that compensates an investor with extra interest when inflation rises. 

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