Ten Experts On When The Next Recession May Hit

I’ve been saying for last couple years at some point we’re gonna have a recession but I don’t see it coming the signs we have from our companies we have 275 companies all of them around the world seem to be doing pretty well we think the economy is in reasonably good shape and can take two more 25 basis point increases this year without any real disruption I do think the market is highly valued but when I look at the implications from that I think it limits more the upside and the rest of this bull market the real risk is as if the cycle ends that’s where the negative return potential comes in half of the bull markets in post-war history have more than half actually have ended when the real yield fell to the lowest quartile to your notice moved as much as it’s moved and why it’s at a 10-year high is because the Fed is relative to the rest of the world normalizing rates aggressively and the two-year knows most is the most sensitive along the Treasury curve and responding to those Fed expectations he’ll curve with one exception 1966 – stands or has basically predicted every recession if the curve inverts let’s say in October history would say the earliest you have a recession would be next summer next August and the latest would be August of 2020 now it’s possible at this time is different in the curve might be sending a bit different signal because long rates are relatively low we do expect to see a slowdown at some point I don’t think that’s going to be happening during the course of this year but certainly the odds are rising in favour of that happening during the course of 2019 and that’s even more likely if the tariff issue remains on the table with no deal I think that trigger could very well be higher interest rate economy is still being juiced up by these very low interest rate for the activity is not been really picking up but if you do get like a pickup in interest rates you know to where the ten year does get to the three and a half four percent type of level you know that will be a drag on the economy idea that you’re inevitably going to have a recession just because you’ve had an expansion for a while is not really right Australia is a country for example that does not have a recession in a long time 25 years or more the u.s.

Expansion the growth rate has been very slow since the financial crisis it’s picked up some recently but it’s generally speaking been very slow so the level of output is actually quite a bit below where it would be if you had a more normal expansion so that kind of that augers for the idea that mainly the expansion can go on for a while my sense is that when the Fed has gone too much in previous cycle and has inverted the curve in the process by raising short rates – too far – to conditions have been met when that has happened one is obviously the yield curve in birds you also have the Fed putting its policy rate well over what is you know the so-called natural rate our star as we call it – to 300 basis points you think about the current cycle the three-month – 10-year curve is about 100 basis points give or take 10 basis points that would require for more hikes at least if and when the curve inverts it will be at least a premature signal let alone maybe a false positive cumulative growth has not been that high so in a way if you think about it most recoveries were much faster snapbacks that then had a fall so if you look at the cumulative growth rate we gots one of the slowest recessions on record why do you think that is regulation I think we swung the pendulum really hard toward regulation we slowed the economy down I don’t buy secular stagnation I call it secular stagnation and I think we had a lot of things that hindered investment that hindered economic activity and and the usual drivers of growth which are an investment cycle a lot of those are being pulled back in the last 18 to 24 months and what we’re seeing is a huge change in investment globally there’s a lot of unusual action still it is a global normalization that’s going on and the more that can be predictable and understandable the better it will be so far it’s been good for the markets I think you have the US economy is looking good that’s partly because of this adjustment of policy I think the tax cut and the regulatory changes are part of that as well but monetary policy is by no means insignificant in this improved economy I’m still optimistic about the performance of the market for the full year I don’t think there’s any recession in sight I think the situation in Turkey is serious for the moment but I don’t think it represents systemic risk so I think the marker was overbought and overdue for correction we’re having a correction Turkey is the trigger I think it’s going to represent a buying opportunity …

 

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