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Dow plunges, trade wars rage on: Is the U.S. headed for a recession?

Posted at 6:08 PM, Aug 15, 2019
and last updated 2019-08-15 20:33:09-04

COLORADO SPRINGS — Between Wednesday's stock market plunge, ongoing trade wars, and other factors, some are worried the U.S. could be headed toward a recession.

Wednesday was the worst day for the market in 2019 and the fourth largest point drop of all time.

To put it simply, the yields on short -term treasury bonds eclipsed the long-term bonds. It's known as the inverted yield curve and it's predicted every recession since the late 1970s.

News 5 spoke with Tatiana Bailey, director of the UCCS Economic Forum, and she said she's concerned.

Bailey said, "Most economists are saying that we have a greater than 50% probability of hitting a recession within the next 12 months."

The winds of the U.S. economy could be shifting with things coming to a head this week - bad news for global growth.

"Yesterday both Germany and China had some economic data that came out that was not very favorable and lower than expected...that was part of the reason that the stock market fell by roughly 800 points yesterday."

So how might people be hit? Some of the big areas include borrowing money and job losses. The latter - because consumers get scared and stop spending money.

"When they start pulling back on those expenditures it hurts businesses. If businesses are hurt they don't invest as much in labor."

The other area is retirement.

"800 point decline in your typical retirement account is a hard's not a good thing for retirees."

While things may seem grim Bailey said, "You don't want to pull out of the stock market if you don't have to when things are on a downward trajectory...because you're going to lose money."

On the other hand, she said, "Always make sure you are not overstretching yourself in terms of the investments that you're making."

In short, don't do anything drastic and hang on for the ride.

Bailey said we are not technically in a recession right now as a recession is defined by two consecutive quarters of declining GDP.