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:
-
- We have been in the longest economic expansion ever.
- The yield curve is flat, and an inverted yield curve signals a recession in 18 months.
What are our thoughts on the two points?
-
- 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.
- 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.
