CNBC’s Faber Assumes Recession Inevitable
Got some hot stock plays for 2008? CNBC's David Faber thinks you should factor in the recession that hasn't yet happened when you adjust your portfolio for this New Year.
CNBC "Squawk Box" contributor Faber warned investors on the January 7 "Squawk on the Street" that stocks reliant on business spending could hurt since a recession, he said, is imminent.
"Business spending, concerns about business spending overall. I think Anne Mulcahy [CEO] at Xerox (NYSE:XRX) may have said something about business spending," Faber said. "I'm hearing business spending slowing. That's the concern - what happens to the stock market in a recession because we're heading into one it looks like."
But, the criteria for a recession is still "a period of general economic decline; specifically, a decline in GDP [gross domestic product] for two or more consecutive quarters" - none of which shows signs of happening.
However, not everyone thinks we're on a collision course with a recession, and basing decisions about your financial portfolio based on that assumption could be a mistake.
"We remain confident that neither a recession, nor any significant consumer slowdown, is in the cards," Brian Wesbury and Robert Stein, economists for First Trust Advisors, L.P., wrote on January 7. "The Fed is not tight, tax rates are still low, productivity is still strong, wages, incomes, and profit margins are still robust, and, after revisions, the US economy has proven its resilience time and time again."
For the last two quarters, GDP (as reported by the U.S. Commerce Department) has grown at a rate of 3.8 percent in the second quarter of 2007 and 4.9 percent in the third quarter - not a sign of a recessionary trend.