Sidestepping a Recession - September 4, 2019

There has been no shortage of recession chatter.

  • Trade war
  • Economic uncertainty
  • Yield curve inversion & falling Treasury yields

Google Trends highlights a recent rise in searches for “recession” and “yield curve.”

If the economy were to contract, it would be the most telegraphed recession in modern history. You see, most economists do a poor job of forecasting a recession.

Factors that favor continued economic growth

  1. The Conference Board’s Leading Index® is at a record high. Using the last seven recessions as a starting point, the Leading Index peaked, on average, 11 months prior to the onset of a recession.
  2. Oil prices historically spike prior to a recession. Today, oil prices are well off recent highs.
  3. Interest rates are low.
  4. Weekly jobless claims typically rise in front of a recession. Today, claims aren’t rising.

Investor’s corner

While U.S. manufacturing has been soft, U.S. consumer spending, which accounts for the majority of U.S. economic activity, has been strong.

At over 10 years of age, the economic expansion is the longest in U.S. history. Eventually, a recession will ensue.

While economic uncertainty is high, leading indicators aren’t suggesting the economy will slip into a near-term recession.