Is the US Economy Bad or in a Recession?

The conclusion of a Harris poll for the Guardian publication May 22, 2024, found that most Americans believe that:

• The US is currently experiencing a recession.
• The stock market is suffering.
• Inflation is increasing.
• Unemployment is at a 50-year high.

However, Naveen Malwal, institutional portfolio manager with Strategic Advisers, LLC. Bureau of labor Statics suggests his evaluation of economic data and markets reported on CNBC does not show many signs of weakness. He went on to state that “I can also appreciate where investors are coming from. Looking at the news, it's easy to hold on to some of the negative stories that we've seen." For most Americans they judge the economy based on prices in the grocery store and at the gas pump.

However, the data tells another story:

• Economists define a recession as two consecutive negative earning quarters. Based on that definition we are not in a recession. The US gross domestic product (GDP) has grown over the last 2 quarters based on the department of labor statistics as 4Q 2023--11.2%, 1Q 2024—10.8%, and 2Q—3.9%.
• Stocks are doing well. The S&P 500^® Index is up 24% in 2023 and is up 15% YTD for 2024.
• Though still elevated from its pre-pandemic levels, the rate of inflation of reported June 12 is 3.33% most recently from 3.4% in April, down significantly from its peak of 9.1% in June 2022.² Furthermore, wages have generally been rising faster than inflation since February 2023, which in theory should lessen the impact of rising costs on consumers as reported in the May 22, issue of the Guardian.
• The unemployment rate is near a 50-year low. In May 2024, it rose slightly to 4%, well below the average reading of 5.7% since 1950 according to the Strategic Advisers LLC is a national financial advisory firm headquartered in Boston, MA.

Gap Between Perception and Economy Reality

It isn’t hard to pinpoint the gap because of inflation which is a greater concern listed by respondents over the last 3 years, in Gallp May 25, 2024, Poll. Beyond that, it’s a skewed understanding of the economy identified as "negativity bias." Reported by Psychology BBC July 28,2024 article. "For example, investors may have seen headlines about layoffs, which can give the impression that the whole US job market is struggling," says Malwal. "What's not covered as much, however, is the more gradual hiring that's happening throughout the country."

As a result, their persist a general anxiety that the S&P 500 Index  reaching new all-time highs is a harbinger of a collapse combine with concerns of the rising debt and the upcoming presidential election. To combat such feelings, it's critical that one reconcile your beliefs with the data to ensure that the decisions you make regarding your assets, your portfolio, and your future are constructive and geared toward helping you reach your goals. While many Americans may believe that the economy is in rough shape, they are spending more than they did a year ago, as they are traveling, dining out, etc., all positive effect on the economy.

What to Consider?

Though markets themselves may not be experiencing much volatility right now, attitudes about the markets certainly are. As a result, the following summarizes a few ways to deal:

• Look less frequently. It may sound counterproductive but spending less time watching financial news or following market developments can increase information overload.
• Consider the sources. Think about where you get your information and evaluate whether what you're reading or hearing is grounded in data.
• Don't go alone. Working with a trusted financial Planner advisor a fiduciary to help you avoid overreacting to one-off economic and market news headlines.

Potential benefits

If you're making investment decisions based on an understanding of the economy that's not aligned to the underlying data, you may miss out on an important opportunity for growth potential."

In Summary

• A recent poll shows that Americans are very pessimistic about the state of the US economy.
• The data does show that the economy is healthy and growing.
• Investors reliving on such as pessimism may miss out on potential growth opportunities.

1. "Majority of Americans wrongly believe US is in recession – and most blame Biden," The Guardian, May 22, 2024.
2. "Most Americans falsely think the U.S. is in recession, poll shows," CNBC.com, May 22, 2024.
3. "Difference between the inflation rate and growth of wages in the United States from March 2020 to March 2024," Statista, Accessed 6/10/24.
4. Strategic Advisers, LLC; Bureau of Labor Statistics.
5. "Americans Continue to Name Inflation as Top Financial Problem," Gallup, May 2, 2024.

     6 "Psychology: Why bad news dominates the headlines," BBC.com, July 28, 2014.

7. "TSA sets new record Friday for most travelers screened in a single day," CNN, May 25, 2024.
8. "Restaurants are having their biggest year ever," Axios, June 5, 2024.
9. "Trump Leads Biden in Six of Seven Swing States, WSJ Poll Finds," The Wall Street Journal, April 2, 2024.

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Past performance is no guarantee of future results.

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S&P 500^® Index is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent US equity performance.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.

Strategic Advisers LLC (Strategic Advisers) is a registered investment adviser and a Fidelity Investments company.

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