Commentary Magazine


A Recession Is Being “Priced In” on Wall Street

With the Dow Jones and SP500 on a downward slide so dramatic that we might see trading curbs installed before the close of day, talk in political circles has turned mordantly to the debt-ceiling deal—about which no one is enthusiastic and which therefore is already serving as an ideal scapegoat for everything that might go wrong over the next month. That’s sheer provincialism emanating from the political chattering classes. In fact, the debt deal came to fruition at exactly the same time as a series of devastating economic reports that indicate we will be lucky if the current moment is only a “slowdown” and not the beginning of—maybe even the middle of—a double-dip recession. You don’t need an economics degree to see the disaster in these numbers. Lower consumer confidence means less consumer spending, which means less demand, which means less economic activity, which means no improvement in employment figures and very possibly a worsening of unemployment. What we are seeing on Wall Street this week is that a coming recession is being “priced in.”

Businesses are not comfortable hiring, taking on new projects, or doing much of anything because they have no way to predict what kinds of policies politicians will enact over the next couple of years and the effect those policies will have on them. What I’ve been hearing over the past week from major investors in the markets in New York is that to a man, CEOs and others with whom they speak regularly are frightened and paralyzed when it comes to new projects. They all echo the alarming things said by the casino magnate Steve Wynn, an important Democratic donor: “I’m saying it bluntly, that this administration is the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it and I could spend the next 3 hours giving you examples of all of us in this market place that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right.”

Grim days.