Is the US Headed for a Recession?
With the US economy on a roll, jobs outlook so positive, housing market revival, and the stock markets at least not tanking, the economists are still suggesting a recession is imminent. They say all cycles must end.
Truthfully, depending on the battle between Trump and the Democrats, we may or may not be falling into a recession in 2020. A stock market crash could happen, and a housing crash is not impossible and the President may not have enough power to stop the negative forces.
Economists predictions previously concluded the economic downturn in the US will begin in 2017. Well, that didn’t happen, so the years just keep getting rolled back. Now it’s 2020 and the errors keep happening.
“The median probability of a recession in the next year rose to 25% from 20% in January, according to the poll. The likelihood a recession happens during the next two years held steady at 40%, although Reuters reports that the most pessimistic call was 75%. — Housingwire report.
A recent Bloomberg post from Larry Ritholtz highlights how bad economists are in their predictions. He concluded that emotional bias and fear of career damage are key reasons for their errors in prognostication. I can’t say for sure whether is he is Democrat or Republican, but the economists political leanings and intent are likely the number one factor in any forecast.
Additionally, economists tend to work with large corporations, many with a big stake in international trade profits, will have forecasts that reflect their employer’s needs. It’s difficult to find forecasters without a bias.
Robert Shiller suggests all business cycles end in recessions and that that trend will overpower anything President Trump can do. He admits he doesn’t know and that the housing market is a mystery to him.
Factors for a Recession
Some would simply point out the excessive political strife is enough to cause a meltdown. Continuous media attacks by the democrats have generated some power to block President Trump from running the country properly. His hands are tied and he’ll have to declare a national emergency for anything he wants to do.
Here’s the major recession cues:
- Trump loses control of economic growth and trade
- stimulus withdrawal – money supply shrinks and dollar goes up
- tax cut boost wears off
- high oil prices
- government debt out of control
- high corporate debt unable to service
- high consumer debt to income
- inflation out of control
- interest rates rise
- trade wars get out of hand
- government standoff persists (lame duck government)
- President Trump gives up
If The Party is Ending, Isn’t That Enough to Induce Recession?
During his time in office, the economy has achieved feats most experts thought impossible. GDP is growing at a 3 percent-plus rate. The unemployment rate is near a 50-year low. Meanwhile, the stock market has jumped 27 percent amid a surge in corporate profits — from CNBC report.
Government stimulus money is being reduced, exports are declining, and the neglected child — US housing market is teetering near the edge. Any crash in housing demand is definitely not good. Demand for luxury homes has already dried up.
The hint of a recession could shake the housing markets bad that’s why home buyers and sellers are wondering when a recession might happen.
Homebuyers are wary. Demand for homes and interest in home loans has really dropped. People aren’t even bothering to check their credit scores lately.
One serious threat is the Fed. They’ve always pushed the economy into recession with huge, unwise interest rate leaps. That’s like pouring mud into your gas tank. And the Fed chair always justifies it one way or another, as “keep consistent with historic cycles and keep growth well under 3%.”
There are a lot of people who believe that economic cycles are natural not engineered, and that this economy must die. 2020 is the year they believe it has to happen. Will it be a self-fulfilling prophecy as usual?
Consumer Sentiment Goes up and Down with the Tide
If a recession is near, it means the bitter end of the American dream for millions. And if Tariffs are removed and free trade is reintroduced, jobs will float back to the cheap labor countries. When the President makes a deal with the Chinese, it is a deal with the devil?
Experts says a recession is just a matter of when, not if. But they’re all looking at old data and old predictive models. Even the AI prognosticators are processing old data to predict events.
The rich are bitter. Trump has killed their golden goose, and drawn the golden eggs back into high labor cost United States, and all that investment overseas is laid to waste. They’ll have to do business in the US and pay US taxes! They hate Trump.
Factors that Forecast Boom Times Ahead
Things are fantastic right now in 2019 though, economically speaking. Interest rates are still low, unemployment is rock bottom, profits are outrageous, business formation is way up, wages are rising, gasoline prices have fallen, and the import tariffs are generating billions in new revenues for the government. US intellectual property is being protected and business startups have a shot at surviving more than one year.
Those tax cuts in 2018 are about to show up in tax refunds this spring and summer.
But what’s happening right now in America is unprecedented. It’s the rebirth of a nation lead by a huge, hungry demographic who have wants (house, EV, high wage job, travel, mobile work, and freedom to do whatever they want).
“The economy’s not falling apart, not by any stretch of the imagination,” said Mark Vitner, senior economist at Wells Fargo Securities Economics Group – from post in the Kansas City Star.
Personal and business finance is excellent. Debt is low, interest rates are low, and most can pay their bills easily including Millennials.
I like the Millennial generation, and they’ve been remarkably quiet about the errors of the conservative and liberal groups who make bad mistakes. Open borders doesn’t work, and closed borders requires a lot of confidence and I think the Millennials have that kind of naive confidence.
However, do Millennials really know history, what the wealthy really want, and know when they’re being lead down the garden path? Only history tells you what people actually did and will do.
Is Old School back in Session?
There has never been the “end of Free trade” and open border access, so this is completely new. Old data from free trade is worthless now.
The old school experts understand a certain framework drawn from dusty paper textbooks, old Keynesian economic models, latest stock prices, government debt, global trade partner demands, and government fiscal debits and credits. Then they extrapolate their statements. It’s a game played every year.
Seeing the path ahead is common sense. If America First keeps going, American business will boom like never before. The result will be similar to the 1950s and 60s when the US was the envy of the world. The US needs time to regain its leadership in technology, finance, and trade.
The country was productive, progressive, and much happier then. It had solidarity, common dreams, and even old hippies like me who rebelled against the outdated industrial era values, have to look back and say, that was a happier time.
But are we headed to a recession or not?
No. My prediction is that Trump will win in 2020 and that he can keep this train on the tracks. The democrats don’t even have the courage to elect a leader and there is no hope in their dark world. All they stand for is thwarting the president and that’s not enough to win an election.
Everyone knows the Dems want to send the jobs back overseas, and despite how Americans feel about Donald Trump, they won’t be willing to go into a recession and lose their jobs, homes, cars, lifestyle, dreams and hopes.
The housing market will recover this summer. Housing prices are poised to recover 5.3% within a 9 month period, which is a 7% yearly growth rate. That’s not a recession.
Just like in the stock market, where a lull in prices is an opportunity to buy, March and April will be good months to buy a home.
Love or hate Donald Trump, more investors are liking him because stock prices and profits keep rising. And when this short post tariff implementation phase is behind us, demand for US goods will soar. If the president can get China to agree to a balanced trade agreement that’s sustainable (never trust China’s communist leaders), well then it might be better.
Either way, we’re likely not headed into a recession in 2019 or 2020 (update: it didn’t happen after all, but a recession and a stock market crash might be ahead).