Wall Street Banks warn of coming Recession

[Johnny2X2X]

https://www.bloomberg.com/amp/news/articles/2017-08-22/wall-street-banks-warn-winter-is-coming-as-business-cycle-peaks

There have been some warning signs for a while now, but this is one of the 1st articles to really back it up this comprehensively. We have a cyclical economy. Obama's approach lead to slow and steady growth vs a boom and bust economy.

Probably not much Trump could have done to avoid it, but he has taken ownership of the tail end of the Obama economy so he'll be responsible for the Recession and how deep and long it is. He has no idea how the economy works for anyone but himself, he will make this worse. There will be calls for a stimulus by the Spring.

For the American worker, holding off the recession for as long as possible is important because wage growth needs to continue as long as it can.

[dalton99a]

1. There is no doubt the crazy asshole will make it worse

[SWBTATTReg]

8. I agree w/ you that tRUMP will make it worse

tRUMP will not believe any bad economic news ('fake news') and thus, react far too slowly to slow or limit the carnage.

-we are due for a correction eventually, it's been quite a while since last economic downturn;
-cheap money won't do the trick, already is cheap enough, so throwing more money at the problem won't fix;
-new tax codes etc. that repubs claim will enhance the economy won't work, after all, the existing tax code in place has already allowed tons of new millionaires and billionaires, and led to a reduction in the middle class;
-any new tax codes won't counteract any state and / or local tax policies, which oftentimes, are higher than fed. taxes by the time you add everything up;
-tRUMP's immigration policies are hurting the labor markets so costs are going to go up across the board;
-unemployment is already at low levels, thus no more additional labor is readily available, and labor costs will continue to go up, increasing costs for all of us;
-If anything, he'll make infinitely more worse (immigration, the border wall (a worthless expenditure of $), etc.);
-his presidency is going to be one of the most expensive ever, as well as one of the most ineffective ever. I thought tRUMP was never going to take a vacation?;
-trading allies are already fed up w/ dealing w/ the unpredictable president, and thus, going on their own, making their own trade deals, leaving the US out of the loop, and more vulnerable to foreign influences;
-low interest rates are probably gone for a while, with feds tightening;
-housing and stock prices have reached new peaks, w/ less and less participation by everyday Americans, leading to 'where's our piece of the pie?' anger and rage;
-any future savings to the American taxpayer will probably be canceled out anyways, with the increased spending on infrastructure and military (basically resulting in zero savings, resulting in a net loss in our paychecks, since inflation is going to probably ramp up, and eat up more of our take home pay);

Need I go on?

[dalton99a]

17. Excellent points

None of which will be acknowledged by the orange genius and his adoring entourage, or the billionaire vultures in his terrific Cabinet

[DetlefK]

2. "How can they predict a recession if they couldn't even predict Trump's fantastic victory?"

Watch out:
- First they will denounce Wall Street for making up this economic trouble.
- Then they will denounce the media for making up this economic trouble.
- Then they will accept that this economic trouble is real... and blame it on Obama.

[ProfessorGAC]

3. Like The One They Predicted in 1995?

Or the one they said wouldn't end when Obama made some moves in 2009?

Or when they predicted rapid inflation when UE numbers fell 40% relative in a 5 year period? Twice.

That's four examples and they were wrong about all 4.

Don't take too much of this as truth. They have sophisticated modeling, but it still requires proper weighting of factors, decisions on how to cross and nest factors, and then still open to interpretation.

They've made a lot of bad calls over the last 30 years

[Johnny2X2X]

4. When you have this many economic indicators predicting a recession you'll have one

The economy is cyclical. The up cycle cannot continue forever as it's already the longest bull market in history. Trump can't do anything to stop it, but he will be judges on how he mitigates it, which will be terribly.

[ProfessorGAC]

7. Whatever You Say

The bull market and the macroeconomy actually aren't the same thing. There's correlation and some one way causation, but your conflating two issues.

As someone who taught econometric analysis at the graduate level, i don't need too much help in understanding how these models work.

I don't see any inevitable recession, absent some extrinsic, non-predictable circumstance, at least in the next 3 years.

[BamaRefugee]

21. Dear Professor

As a 66 year old who has moved all his IRA holdings (which I am going to depend on for the rest of my life) to moderate portfolio (Stocks 62%
Bonds 31%
Money Market 7%)

do you have any recommendations for possibly getting out of the market for a while at some point? I have swapped out successfully then gone back in a few times over the years, but that was all just gut instinct. I'm kinda thinking of ducking out before October comes around

[LanternWaste]

30. Is there an absolute equivalence between the forecast now and the forecast then?

"Like The One They Predicted in 1995?"
Is there an absolute equivalence between the forecast now and the forecast then? Or are there relevant difference rendering your incredibly sincere query moot?

"They've made a lot of bad calls over the last 30 years..."
So have meteorologists. But discounting them simply to advertise how clever I think I am is the height of an arrogant idiocy. Not that you show any indication at all of doing that on this thread...

[spanone]

5. that's a gimme with republicans in charge of the economy...

[Elwood P Dowd]

10. A depression or recession under every single republican president since 1929. (nm)

[Cryptoad]

18. Never has worked,,,

Conservative Rethug Economic Policies!

Everything they fiscally touch,,,, turns to shit!

[Elwood P Dowd]

19. Yes, and when you explain that fact to their brainwashed voters you hear something like this;

"Well, I never heard my news sources (Fox & Limbaugh usually) say that, so it must be fake news."

[Cryptoad]

20. Very true,,,

most could lose every material thing they have and living under a bridge somewhere and not believe it.... But many of the those non-hard core supporters will make some movement of this.

[HeartachesNhangovers]

6. What does this mean:

“These low macro and micro correlations confirm the idea that we’re in a late-cycle environment, and it’s no accident that the last time we saw readings this low was 2005-07,” Sheets wrote. He recommends boosting allocations to U.S. stocks while reducing holdings of corporate debt, where consumer consumption and energy is more heavily represented.

I guess I know what it means: "Buy US stock and sell corporate bonds." But how does a prediction that the current business cycle is turning downwards lead you to that conclusion? Generally speaking, bonds are less risky than stocks because there's less potential downside.

[unblock]

23. all things being equal, bonds may be safer than equities; but, not all things are equal.

if you have bonds from a highly rated company in a robust or "recession-proof" industry, that's probably still safe.

but a lot of the corporate borrowing recently has been in the consumer discretionary, energy, and utility sectors. these industries are vulnerable during a recession.

what he's really saying is that you should try to get away from these vulnerable industries and into safer industries.

if you move funds from a highly diversified bond fund into a highly diversified equity fund, you'll likely achieve this simply because of the mix of industries in the bond market vs. the mix of industries in the equity markets.

it's simple, bite-sized advice. a more complete answer would explain that it's really about sector allocation rather than bonds vs. equities.

[HeartachesNhangovers]

25. Thank you. Unfortunately or fortunately, I don't

own any individual stocks or bonds. I own broad-sector stock and bond mutual funds, so I'm already paying some fund manager to make these decisions on my behalf. I hope they get it right!

[unblock]

26. actually this is where his advice might be helpful.

if these are index funds or other funds that try to maintain diversification across the entire bond market or equity market, then their advice would be to sell some of your bond funds and but some of your equity funds. this would get you away from the vulnerable sectors.

however, if your funds are actively managed and the managers already go in and out of various sectors based on their own modeling, then you may be right in that you can just leave it be.

anyway, all this is just assuming that the article's projections are right in the first place,....

[Wounded Bear]

9. TBH, Obama's economy would have been better...

if the Repubs hadn't hamstrung him on almost everything.

Reality seems to be that Repubs get to whine about anything and get press about it.

I expect the economy will break downward soon, been expecting it since Trump took office. Partly because of the cyclical nature of it all, but also because Repubs don't really do economics. They only do tax cuts, which tends to lead to deficits, which contribute to recession. Expecting the 'Obama economy' to last for long after that election is a pipe dream, one that Wall Street is starting to wake up from.

[alcibiades_mystery]

11. Recession is coming for sure

Indeed, by next Spring there will probably be good data that it started late summer 2017.

Seeing lots of folks in indicator industries getting laid off.

[Johnny2X2X]

14. Nothing is ever for sure

But it's probably more likely than not now, according to people who know more than us.

[Achilleaze]

12. Trump Slump (R)

Trump Slump
Trump Slump
Trump Slump
Trump Slump
Trump Slump
Trump Slump
Trump Slump
Trump Slump

[Cryptoad]

16. i like it

[Initech]

13. The billionaires need more mega mansions and Bugattis.

[Cryptoad]

15. But But,,,, But,,,,,,,,,

Trump says we are in the Greatest Bigly Economy ever! WTF?

[INdemo]

22. This is just right wing bullshit..kinda like the World will end at 1601 EST. Sat.

Anything to make Obama look bad and try and make their puppet look good..

Its just another way to divert attention away from Trump and the Russian connection.

[Moostache]

27. Wait....the world is ending Saturday??? Hazaah!!! My mother-in-law was coming to visit Sunday!!!

Woo-hooo....dodged THAT bullet!!!

[FSogol]

24. Wow, even Wall Street is getting tired of winning!

[klook]

28. "Probably not much Trump could have done to avoid it"

-- Right, because Trump is a Republican and therefore his only economic policy is "Cut taxes for rich people."

However, a president who was competent and compassionate (like, oh, say, Hillary R. Clinton) would have a team of advisors with very different priorities -- yielding better results.

[Elwood P Dowd]

29. We would have at least had a chance for an economy similiar to Bill's.

Instead we will probably get something along the lines of Bush's 2007-2009 recession.