Let us not let the left-wing media talk us into a recession. Make no mistake: they are eager to do so.

For months the liberal press has echoed Democrats’ hand-wringing on the campaign trail, repeating Sen. Elizabeth Warren’s unwarranted warnings about debt levels for instance, or former Vice President Joe Biden’s alarms about how President Trump’s trade confrontation with China is hurting consumers.

After all, it’s hard to call for a revolution if the people are happy.


Less enthusiastically reported have been record lows in unemployment and accelerating wage increases – news that might buoy consumer sentiment, and, not unimportantly, Trump’s reelection prospects.

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That’s why Democrats and their media enablers were beyond giddy to see markets nosedive. This was it, pundits proclaimed: Trump’s trade war has brought us to the brink of a downturn.

Maybe. But maybe not.

The very next day, the Commerce Department reported that U.S. retail sales surged 0.7 percent in July, up from a 0.3 percent gain in June, beating expectations.

The U.S. consumer continues to defy prognosticators; despite Democrats campaigning on the miseries of the middle class, by gosh the middle class insists on streaming into Walmart and pumping up the economy.

Walmart just reported that its “U.S. comp sales increased on a two-year stacked basis by 7.3%, which is the strongest growth in more than 10 years.”

Also, the Labor Department reported that productivity rose 2.3 percent in the second quarter, down from 3.5 percent in the first quarter, but a solid gain nonetheless, and one that bodes well for future wage hikes.

The U.S. consumer continues to defy prognosticators; despite Democrats campaigning on the miseries of the middle class, by gosh the middle class insists on streaming into Walmart and pumping up the economy.

To be sure, the outlook is less rosy than it was several months ago. U.S. manufacturing has weakened, falling 0.4 percent in July, and the rest of the world is struggling. Still, our domestic economy is in good shape; the market reaction appears overblown.

Here’s how to make sense of the recent market plunge:

  • Because interest rates in much of the world have turned negative, the U.S. is attracting floods of money from investors worldwide seeking returns. That influx has driven bond prices higher and our rates down, and briefly caused what is called an “inversion,” in which the rate on a 10-year or 30-year bond is lower than the rate on a 2-year instrument. That is unusual, since investors normally demand higher rates in return for committing their money for a longer period of time, but it is not unprecedented.
  • A sustained inversion has sometimes indicated a future recession after a period of several months, but not always. Economists differ on the meaning of interest rate patterns today. An astonishing $15 trillion in bonds around the globe are yielding negative interest rates currently; that fact has muddied normal calculations. A further complication is that the Federal Reserve is managing an unusually large $3.8 trillion portfolio of bonds and other debt instruments. Their purchases and sales can meaningfully skew bond prices and interest rates. Bottom line: it’s too early to say the inversion guarantees a recession.
  • Stocks are up substantially this year. Even after the recent sell-off, the Dow is ahead 9 percent and the S&P is up 13 percent so far this year. Many investors are responding to the recent ups and downs by harvesting some gains.
  • Ultimately, the stock market will trade higher or lower with corporate earnings, which depend on overall economic activity.

Here’s what you need to know about the state of the economy:

  • American consumers, responsible for two-thirds of the economy, remain upbeat, and they are spending. If that sector remains strong, we will continue to grow.
  • The economic slowdown making headlines is in Europe and China. The most recent data included a second-quarter contraction in Germany’s economy of 0.1 percent compared to the prior three months; in addition, June industrial output sank 5 percent year-over-year. Also, a key indicator of economic sentiment dropped significantly in August, hitting its lowest level since December 2011. The German ZEW index came in at -44.1; economists had expected a more modest negative reading of -28.5. 
  • China’s economy is also hurting. The most recent sign of a slowdown is that industrial production rose only 4.8 percent in July, the slowest rate in 17 years and down from 6.3 percent in June. Retail sales in July also came in weaker than expected in July, up only 7.6 percent, down from 9.8 percent in June.


A slowdown elsewhere in the world hurts the U.S., without a doubt. But exports make up only about 12 percent of U.S. GDP; moderate weakness should not lead us into recession.

Meanwhile, some elements that bolster optimism, and that should keep panic at bay, include:

  • The National Federation of Independent Businesses reported that in July, its Small Business Optimism Index bounced up 1.4 points to 104.7. Maybe more reassuring, the group’s “Uncertainty Index” dropped, reversing a surge in June. Also, the group reported that “Small business owners’ plans to create new jobs and make capital outlays advanced and earnings trends improved, supported by a solid improvement in sales trends. Plans to order new inventories posted a solid gain.”
  • Consumer sentiment has also remained robust. That’s because jobs are plentiful and wages are rising. The Bureau of Labor Statistics reported that hourly compensation was up an annualized 4.8 percent in the second quarter after a hefty (revised) 9.2 percent gain in the first three months of the year.
  • Inflation is still very low.


Overall, the U.S. economy is sound. Markets may remain choppy, as investors wait to see whether the inversion of rates persists. Possible catalysts for higher stock prices would include a signal that the U.S. Federal Reserve will cut interest rates to keep us in sync with the rest of the world, or a breakthrough in the trade talks between China and the U.S.

Though the latter appears unlikely today, President Trump will push for some resolution. He knows the economy, and his reelection prospects, may depend on it. He’s just ornery enough to deny Democrats their recession.