Hugh Johnson, Chief Economist at Hugh Johnson Economics, joined Closing Bell to break down the latest market meltdown, and his prediction for whether a recession is ahead as the 2022 sell-off continues.

Closing Bell

What's Ahead for Stock Market as Major Indexes Have Worst Day Since 2020

down the SNP scene, their worst daily drop since 2020 near the start of the pandemic. As back to back disappointing reports from walmart and target stoking investor fears about the american consumer amid sky high inflation and astronomical gas and food prices for more on this, I'm joined by Hugh johnson chair and chief economist at Hugh johnson economics Hugh do you think the U. S. Is headed for a recession? It's gonna be really a close call Kristen. If you were to ask me that question a couple of days ago, I would say no and I would have said no. On the basis of fact, you look at things like the index of leading economic indicators indicators that tell us where we're going, not where we've been. And those indicators have been up 21 of the last 23 months. And of course we saw that the april number was down. We saw that this morning which was discouraging but nevertheless I would have said based on the leading indicators I would say. Yeah, the economy slowing. Yes, a very sharp correction in the stock market, but it would not be accompanied by a recession. I'm still saying that but I'm less confident in saying that today than I was saying two days ago. There's no question the message of the markets is Hugh you better reexamine what you're thinking because it looks like we're headed towards an economic recession or a contraction in the economy. I don't see it yet in the numbers. But nevertheless, that seems to be a fairly loud and clear message from the markets which are not acting well what has changed in the past few days, that would lead you to think that it's more likely today than it was at the start of the week that we could see a recession on the horizon. Well, you know, Kristen, you mentioned it, you mentioned the target earnings and that was a little disturbing. You know, I looked at the retail sales numbers for april and they were pretty good, particularly the automobile part of those. I looked at the production numbers, they also were pretty good, particularly the automobile part of those. But then I looked at the target numbers and I looked at the walmart numbers and I've looked at a lot of other retailers and I said, oh, these guys are not doing well and it's not just the case that their margins were poor. It's also the case that their revenues really not were not what I would hope to be. And they were certainly not entirely consistent with the retail sales numbers were like, so I said, wait a second, I've got to be a little bit worried here. The second thing is of course, consumer confidence, Consumer confidence took a real decline, a very sharp decline for the month of april. And then we saw the leading indicators for the economy today declining. It still doesn't tell me recession is on the horizon. It still tells me that this is a correction in an ongoing bull market, but I cannot as easily dismiss the idea of recession today as I could say a couple of days ago, I'm still holding on but holding on for dear life should the U. S. Consumer hue and the U. S. Investor do in a market like this when we could see a potential recession? Yeah that's a that's a really good question. Look we've had a really sharp decline already and that's why when a lot of investors are asking, Okay now what do I do now that we've had this very sharp 20% decline already in the market. And the answer is if you're really nervous about it, what you can do is still take a little bit of money off the table. What I'm saying is don't throw the baby in With the water whatever. However that expression goes and the reason I'm saying that is we've already had a 20% decline and I don't see much more of a decline in this market. Remember one thing we've got now and and don't ever forget this the level of bearishness, there are hardly any bulls out there and when you get a very low level of bulls, everybody's sold out and that's usually a good sign. And that's why I say maybe sell a little bit now but not a lot. Now the question is okay if you're really not nervous, what do you do, what do you take advantage of this as an opportunity. Well you do. so you can buy a little bit now. But remember the old expression, dollar cost averaging, which means by a little bit. Now don't put all, don't bet the whole ranch right now, put some in now and then wait a month and put a little bit more. And you've got to be really careful. You've got to use a lot of, let's say finesse in this financial market environment. It's very tricky and it's very volatile. I'm glad you explained that a dollar cost averaging something we're hearing more and more of us. People do try to navigate what has been a consistently volatile stock market this year, Hugh johnson Chair and chief economist at Hugh johnson Economics. You thank you.