Almost every person enjoyed playing on a see-saw as a child. The constant up & down was a thrilling ride for a kid but as an adult the excitement of a see-saw diminishes, especially if that back & forth motion represents the price of a barrel of oil and has a negative effect on the stock market. That’s exactly where we are today and it’s made many average investors get more than just motion sickness: They’ve lost significant amounts from their nest-eggs. On Tuesday the price for a barrel of crude oil dropped 5.5% to under $30 . Yesterday: Oil vaulted back up 8% to close above $32 per barrel. The question many average American investors are asking: When will it simply be time to get “off the Wall Street see-saw” before we enter a recession?
With all of this volatility on the markets, bond guru Bill Gross was asked by CNBC: “Are we headed toward a recession?” Gross, who runs the $1.3 billion Janus Global Unconstrained Bond Fund and founded bond giant Pimco more than 40 years ago, said debt problems are coming into clearer focus for the U.S.
“The household sector has delivered, but the corporate sector never did, and with investment grade and high yield yields 200-1,000 basis points higher now, what does that say about future rollover, corporate profits and solvency in many commodity-sensitive areas ?Indeed, ratings agency Moody’s has issued two warnings this week about deteriorating conditions in the corporate bond market. “
Bill Gross, who manages the Janus Global Portfolio explains why he thinks the U.S. could be back in recession in under two years.
Here are the final numbers from Wednesday, 2/3/16 on Wall Street.
Dow Jones Industrial Average: 16,336.66 (+183.12 / +1.13 %)
NASDAQ: 4,504.24 (-12.71 / -0.28 %)
S&P 500: 1,912.53 (+9.50 / +0.50 %)