Weak US Economy Flashes 'Risk On' Signal for Stock Market Bulls, Crypto Coins News

TheS&P 500extended itsrecoveryon Friday, adding to Thursday’s solid bounce following an intense two-day stock market correction.

The bullish price action prompted many traders to predict that the market’s bellwether index had already bottomed out.

These traders are not alone in their optimistic outlook. Fundstrat co-founder Thomas Lee remains mighty bullish on the stock market.

He believes that the S&P 500 will print new highs despitefaltering economic datapublished earlier in the week.

Thomas Lee: ISM Bottom Is a ‘Risk On’ Indicator for Stocks

CNBCreported that the ISM Manufacturing Index dropped to 47 .8 in September, marking theworst month for American factories in a decade. The weak manufacturing output – coupled withless-than-encouraging datain the service sector – is a signal of sluggish economic activity and could present the stock market with a bearish forecast.

However, the Fundstrat executive believes that the worst is behind the manufacturing sector.

Predicting that US PMI has found a bottom, Lee said that the S&P 500 could surge to a new all-time high of 3, 125 before the end of the year. That implies upside of nearly 7% from the index’s present level near 2, 930.

This is a daring prediction considering that US PMI hasn’t ranged this low since the financial crisis.

The weakness in the manufacturing sector is possibly one of the reasons why JP Morgan predicts a recession in the next months.

JP Morgan: ‘US ​​Recession Risk Has Risen’

While Tom Lee forecasts growth in the following months, J.P. Morgan begs to differ.

In a chart posted by the widely-followedHolger Zschaepitz, the financial institution projects that the US economy has a 40% chance of plunging into a recession within a year based on economic markers. If you look at the yield curve signals, the odds climb to (%.)

Hedge fund founderWill Meade supports the view of JP Morgan. In a tweet, the former Goldman Sachs analyst told his followers that yesterday’s rally was a chance to get out of the stock market.

We also spoke toEmma Muhleman, a global macro strategist who doesn’t share Tom Lee’s rosy outlook. She told CCN:

“Equity markets are likely to be volatile and we anticipate some turbulence and rising volatility as the quarter progresses toward year end.”

She added:

“Global economic activity should continue to weaken after we just saw the US ISM manufacturing gauge hit levels not seen since June 2009. ”

However, for now, it appears that Wall Street’s bull case has been more persuasive to investors.