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2018 Preview and Assessment

Market valuations are high.  Current consumption is being financed by debt.  The housing data is mildly positive, but has been impacted by “rebuild” issues in the wake of natural disasters.  Corporate balance sheets are strong and laden with cash.  The world’s major economies are doing well and central banks are beginning to tighten policy led by the U.S.’s Fed.  Q4 real GDP growth looks to come in above 3% (third …Read More

On a Recession Watch

For the first time since the industrial revolution, the U.S. faces two significant growth issues: 1) a declining labor force; and 2) a job skills mismatch.  The declining labor force is demographic in nature and is occurring in every industrial economy; likely a function of the long-term success of capitalism.   The skills mismatch is a function of technological change that is so rapid that the skills of the existing labor …Read More

“Normal,” It’s Not What You Think!

Most readers remember the pre-recession days of 4% GDP growth, interest rates at levels where savers had return choices worth pursuing (e.g., the 10 year T-Note at 4%), and workers could count on annual real wage growth.  Today, many refer to this as “normal,” and there is a desire, if not a movement, to return the economy back to such a state. You can see this in the political arena.  …Read More

At Recession’s Onset, There is No Bell, Bugle, or National Anthem

From my reading of the business media, there are few business economists who believe, like I do, that the probability of a recession in the next 12 months is greater than 50%.  A recession is generally viewed as two consecutive quarters of negative real GDP growth. Looking forward, a recession isn’t inevitable, as there have been ‘soft landings’ in the post-World War II era.  Nevertheless, from my lens, there doesn’t …Read More

The Risk of Recession is Rising; So is Market Risk

Recession: This is the hardest world for any business economist to pen, especially when the equity market is on a tear.  Nevertheless, that is the reality of a slow growth, deflationary world where not much negative must happen to push the 1% growth economy into negative territory.  Post-election, markets initially rose on the hopes of economic stimulus from the Trump administration.  Then, they flattened as prospects for rapid policy changes …Read More

Investors, prepare for slower growth

From an investor’s standpoint, this has surely been a summer of discontent.  All markets appear to be too high, there is no yield to be found, and there appears to be no place to hide, at least inside current investment standards as set forth by Wall Street.  While the conventional wisdom looks at cash as “trash” because it generates no return, in today’s world where there is more deflation than …Read More