Not to press the panic button or anything here, but according to the chief economist of Saxo Bank there is a 60% chance of a global recession happening in the next 18 months.
You can read the full article here however since I am such a nice monkey I will quote the article below and give you the most important points listed in the article if you wish to read a more abbreviated version. I apologizes if this post becomes rather long.
Our main global macro outlook still maintains that recession is more likely than not in the near future (12 to 18 months) based on the global credit impulse having peaked simultaneously with global inflation," Steen Jakobsen, chief economist at Saxo Bank, said.
akobsen explained that the biggest "perception-versus-reality gap" in the market currently remains this risk of recession. He added that his company is not predicting a recession, but that its economic model does indicate a significant slowdown as "the large credit impulse from China and Europe in the early part of 2016 has not reversed to negative", which it says should make the market conservative, risk averse push investors into U.S. fixed income.
But, according to Jakobsen, Europe's momentum is not followed in other parts of the globe.
"One thing is absolutely clear: Asia is not going to contribute anything in 2017 to growth. China is on total standstill," Jakobsen said Monday.
Mike Bell, global market strategist at JPMorgan Asset Management, told CNBC Monday that European stocks "look pretty cheap" compared to U.S. stocks. "What you're starting to see now is that underperformance of earnings that you've seen since the financial crisis is disappearing," he said. There's been a fundamental acceleration in the euro zone economy, he also noted.
Now I am no doomsday theorist here, nor am I some genius macro economist who can predict this situation. However I do believe that the market has been hot for a while, and there are some "reduce speed" type signals. That is not to say the market is going to tank or that we are headed toward recession, but I believe that we will hit a cool down period.
What are your thoughts and opinions on a new recession kicking off in 18 months? How do you think Trump would react to a recession? If you do not believe we are heading toward a recession please explain why.
Happy Monday everyone, have a great week.
-Wu Tang Forever.
Is 60% higher or lower than the average chance of a global recession in 18 months at any given point in time and by how much?
Most strategists and PMs/HFs I've heard (second-hand) have mentioned a likely pullback soon followed by a potential upswing again after. I'm not a market strategist though so can't really offer a whole lot in terms of educated insight outside of biotech.
according to the article, there is an outlook of a 10 percent chance of a recession. While this economist and his group see a 60 percent chance.
But thanks for adding that most strategists you have spoken with are talking about a pullback. Interesting stuff.
When you make the choice that the leader of the free world should be one that supports ridiculous border taxes with the intention of crippling nations; there will be consequences.
Whoever hit me with monkey shit is free to link supporting evidence to the contrary of what I said. What I said is a fact. There will be consequences. There will be upside. It's a decision, grow up.
Do not want this post to get too political, but please show me where Trump wants to "cripple nations".
wouldn't shock me to see a recession, business cycles need to rollover every once in a while. there's a big difference between a run of the mill recession where we see a pause in GDP & the stock market versus a great depression or 2008 type scenario.
never believe forecasters. someone will always be crying wolf (marc faber), someone will always be saying BUY BUY BUY (jeremy siegel). a broken clock is right twice a day.
remember last year when RBS said sell everything?
http://www.financialpost.com/m/wp/blog.html?b=business.financialpost.co…
what's funny is they used credit spreads as their indicator, and high yield had a tremendous year.
instead, own quality global stocks and if your net worth is meaningful (>500k), keep cash on the side for opportunistic trading (you want to have dry powder when we do see the eventual crash). if you buy an index fund, just dollar cost average over long periods of time and never sell.
permanent impairment of capital only happens under a few scenarios:
Was hoping you would chime in. GREAT stuff here.
too add, I put zero stock in forecasters. There are more "the world markets are going to collapse and we will only be left slinging poop at one another" articles and opinions out there than there are economists.
Yeah, recession is coming because of a border tax and not the fact that the Economy usually cycles down after 8 years of growth. Or the unprecedented levels of QE. Or consumer debt crossing the trillion dollar mark while wages have remained stagnant. Or rates increasing.
But yeah, definitely the border tax.
Trump will be inflationary, I thought that was the consensus.
So a recession whilst inflation, i.e stag flation?
Unlikely I'd like to think!
Trump is not going to impose a border tax or any of the tariffs. He's using it for leverage in negotiations. C'mon now.
Art of the Deal 101
There will undoubtedly be a recession in the coming months/years resulting from elevated interest rates. Rising interest rates (via contractionary monetary policy) will always yield a structural crisis. This is necessarily the case. The timing is unclear but it will happen. Should be noted though that not all recessions are the same. Mild economic contractions could result from simple changes in demand patterns, both for consumer goods and for money. This sort of recession is not regarded as an 'economic' crisis. It's an adjustment that yields involuntary unemployment due to price rigidity.
finally, someone who understands market history.
recessions can be ugly, but they don't mean the end of the world and a reason to bail out of markets.
The time to buy is when there's blood in the streets.
I sure hope we get one soon. Asset prices are rich af. KKR moved its forecast for a recession to mid 2019 from 2018. I think they're counting on Trump passing some economic friendly policies between now and mid-2018 that will drive the market until 2019. I'm watching the political environment to see what unfolds this year. It doesn't look like optimism is justified with the Putin bromance officially ending and the healthcare problems we saw. Also, Trump still has unfulfilled seats in his administration with top positions still shifting around. I think it'll come down to what he's able to accomplish on the domestic front, in terms of when we see a recession. But his job definitely got tougher in recent weeks.
I would welcome it. It'd basically be the death sentence on globalization.
So? Armstrong's been calling for 2016-2020 to be an economic downtrend since...decades ago.
One reason that the Trump election has been bad for me is that he economy has been a lot shittier than people think. However actually saying that the economy bad has been more or less a thoughtcrime among preppy white people because they're afraid it would cause them to be perceived as racists. As a result I've been able to make some winning stock picks by betting on firms that profit when the economy is bad. Now that Trump has been elected it's much more fashionable to criticize the economy and I've lost one of my major edges.
That said if you want to know where the most likely trigger is, look at how bad the euro-debt situation and in particular look at the methods of those stress tests on European banks. I think you'll quickly notice that some extremely unrealistic positive assumptions were baked in.
The red panda shares the giant panda's rainy, high-altitude forest habitat, but has a wider range. Red pandas live in the mountains of Nepal and northern Myanmar (Burma), as well as in central China. These animals spend most of their lives in trees and even sleep aloft.
finally some good news
When foraging, they are most active at night as well as in the gloaming hours of dusk and dawn.
Red pandas have a taste for bamboo but, unlike their larger relatives, they eat many other foods as well—fruit, acorns, roots, and eggs. Like giant pandas, they have an extended wrist bone that functions almost like a thumb and greatly aids their grip.
A mild economic recession in 18 months? Sure, it seems like we could have two quarters of mild GDP contraction in that time frame.
An economic crisis? Seems less supportable.
Personally, my money is with Bridgewater on this one - things are fine for the next 2-3 years, but after that, my money is on developed markets entering a prolonged period (~10 years) of trouble/stagnation.
My projection is that the markets will crash hard during Trump's presidency and he will be hanged for it while most ignore the $20T deficit he inherited. Lets not forget about consumer/gov debt going up, wages being flat and horrid GDP growth with extremely low interest rates...
I'm not saying there's gonna be a crash but my economic model filled with lots of number I typed down (which makes it correct) says there's a 80% of a recession. If the guess is wrong, don't blame me or my company, blame the model for not living up to the real world's expectations (or vice versa).
These guys crop up every other week. Yet none of them ever puts their money where their mouth is.
In my opinion, Europe is not the main factor. Like it or not, balance of economic power already shifted more toward Asia. If you want to predict future of world economy you have to put on a lense of Asia, otherwise, you won't be seeing the big picture.
Call me delusional, but I think global economy depends on how Korea situation unfolds. I am from Korea and I can feel it in my skin that the peninsula's situation is nearing a conclusion-> unification either forcefully or peacefully.
If things go wrong and war takes place in Korea, I think world economy will fall apart as this economist predicts. It will worsen protectionist trade policy. It will kill long-waited economic momentum we have experienced recently.
On the other hand, if peaceful unification takes place, this will open up economic opportunity that we have not seen in the last 100 years. Imagine a birth of a new wealthy nation in East Asia of the size of Japanese economy.
I am predicting peaceful unification and that this will boost world economy. For Americans, this can be hard to imagine. So let me help.
(1) Imagine yourself in Japan. After unification, you can take a train in Tokyo station and you can travel non-stop to London. This mean you can travel from London all the way to Japan via train. Korea unification means unprecedented opportunity for travel and leisure. You have to admit, wouldn't you want to travel to free-Pyongyang after unification?
(2) Opening up North Korea could mean logistical revolution in Eurasia. This will create development opportunities in North Eastern Asia (Russia and China such as vladivostok) Imagine about flowing of massive new products, people, and capital, vitalizing this region. This probably worth trillion dollars of economic impact.
(3) North Korea is rich in minerals worth trillion of dollars. Have you heard of rare earth material? This is a very important material and it is a very important material that goes inside most electronics products. Currently, 95% of rare earth material production is monopolized by China. North Korea has as much rare earth as China. They can help world diversify supply of rare earth material.
(4) I predict that Russia's infrastructure investment similar to "New Deal" can take place. With Trump's alleged connection to Russia, it is more likely now than ever for this to happen. In addition, this is so especially if Korea unifies peacefully. This means that they will take advantage of cheap North Korean labor and abundant capital of South Korea. Two Koreas will work together to develop Russia's nearly non-existant infrastructure in East Russia.
Do you think Trump will do nothing if this happens? America can also see "New Deal" type of massive infrastructure makeover. This will likely worth another trillions of dollars.
(5) Combining this momentum with "Fourth Industrial Revolution" can actually mean biggest economic growth opportunity that we have not seen in the last 100 years. You guys here already know about the fourth industrial revolution - IOT, AI/Big data, Drones, 3D printing and so on. I have seen various reports and it can worth over $15 trillion dollars by 2025.
Again, we don't live in 19th Century. If you want to analyze world economy, you need to put on a lense of Asia. Combining peaceful unification in Korea, development of infrastructure in north East Asia, with the "Fourth Industrial Revolution", I think we may see economic boom we have not seen in the last 100 years. Economy impact can be massive. I don't see why this won't boost economic impact of $50 trillion to $100 trillions of dollars.
Most of you barely mentioned monetary policy, but all of you are keen on talking about macro. And for that reason, I'm out.
Could the U.S. experience an [economic collapse]in 2017? The idea sounds pretty implausible; after all, U.S. stocks are at record levels, unemployment has fallen to 4.6%, and the Fed recently raised its key lending rate. Surely these are signs that the U.S. economy is going strong?
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