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Recession fears fading on Wall Street

Wall Street economists are less concerned about the chances of a recession happening this year. Yahoo Finance Reporter Josh Schafer breaks down the data that has economists feeling more optimistic about the economy.

Video Transcript

JULIE HYMAN: The S&P 500 now in what Wall Street refers to as a bull market. The index up 20% from its October low. The recent rally in equities has Wall Street hopeful as more economists are becoming increasingly less worried about a recession this year. Yahoo Finance's Josh Schafer has the details for us. Josh.

JOSH SCHAFER: Yeah, Julie. So it's the second week of June. We spent a large part of the beginning of the year talking about that 2023 recession, right? When will it come? It might come in the second half of the year. It might come early in the second half of the year, which in theory, would be soon. But now as that date is sort of approaching, we're seeing economists cut back on that. If you take a look at GDP and what's happened there, I think there was a large part of this at least a few months ago when you take a look at first quarter GDP actually getting revised upward to 1.3%.

Wells Fargo coming out this week now saying they expect a recession to actually come in 2024. Of course, we talk about GDP, because that is one of the key metrics that we watch when we talk about recessions. We could get into a nuanced debate about if we were in one in 2022 when we had two consecutive quarters of negative GDP, but we'll save that for another day. And I want to take a look at nonfarm payrolls because that's something that a lot of economists are watching right now. Because you take a look at what we saw in May, that big jump up, 339,000 ads, that was the largest monthly ad since January.

So right now, you are seeing a very strong labor market. And until that comes down, economists simply don't see a recession happening, and it's going to take some time for that number to come down, right? So we're talking probably not Q3, maybe Q4. And again, to really be in a recession, we need repeated quarters of slowing economic growth, right? So that's why these projections are starting to get moved out into 2024. And the final thing, Rachelle, I want to take a look at here is just simply the S&P 500. We talk a lot about how stocks and markets predict what is going to happen, right, not what has happened.

Well, if we take a look at the S&P 500, as we mentioned off the top, entering bull market territory yesterday. If stocks are a forward-looking indicator, people feel pretty good in general about the economy right now, and at least aren't seeing that slowdown quite yet, Rachelle.

RACHELLE AKUFFO: Indeed. I mean, especially as we look at the VIX at the moment, significantly down over the past year. Great stuff. Thank you so much. Josh Schafer there for us.