Weekly Update:

Happy August!

The sun is out, and it is summer. And, school starts in 3 to 4 weeks….

I keep hearing the question “when is the recession starting?” I also keep hearing the statement “a recession will happen next year, or early 2020.”   I ask why they feel this way.

The two main answers are:

    1. We have been in the longest economic expansion ever.
    2. The yield curve is flat, and an inverted yield curve signals a recession in 18 months.

What are our thoughts on the two points?

    1. This may be the longest recovery ever. But, let’s look back at it.  Did the recovery start in 2008 which would make this a ten-year recovery? House prices and the price of a lot to build a house was not looking healthy in 2008. One could find a builder and a reasonably priced lot until about 2013. If 2013 was the start of the recovery, we are in the 6th year of a recovery. Not too old or young.
    2. The yield curve is flat. The Federal Open Market Committee (FOMC) still has the quantitative easing portfolio holding down long-term rates.  The FOMC has proven that it will slow inflation by raising short-term rates. So, long-term inflation is not a concern.

I like to leave the conversation with the thought that the FOMC could be raising rates to a more normal level. So, is a recession in sight? I give it a 20% chance.

Please contact your MFA Advisor to discuss the economic outlook.

Enjoy the last few days of summer with your kids.

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