Guys, a lot of people i talk to say that markets are too concerned about a recession. They prefer to look at GDP growth, unemployment rates among other things. My concern is that all of those are lagging indicators.
When it comes to 2019, apart from the potential trade war, do you guys think there are any leading indicators to suggest if recession talks are suggest fluff or there is something to back it up?
FYI I prefer to look at what the yield curve is doing, but I have never lived through a recession so have no idea what to tell.
Yes. Leading economic indicators point to slower growth. Globally, most have peaked between December of 2017 and March of 2018. In last 2016 and through 2017, the global economy was in a period of cyclical expansion, which lifted nearly all markets.
Here's a quick resource of some economic indicators most analysts/PMs cover: https://www.conference-board.org/data/bcicountry.cfm?cid=1
Most have peaked in December of 2017 or earlier in 2018. These are indicators of economic activity. So if the data trends lower, then you can conclude that economic activity growth is decelerating. Another factor for growth in 2017 was that financial conditions were relatively easy across the world. In 2018, that situation has changed. The US is close to a neutral rate, and fiscal policy effects from last years budget are evaporating.
Initial state (end of 2017): financial conditions are easy + economic activity growth is rising Current state (end of 2018): economic activity growth is slowing + financial conditions are tightening
Initial future state: GDP in US will grow above 3% in 2018, and around 2.7% in 2019 Current future state: GDP in US will grow between 1-2.5% in 2019, and flat or negative in 2020
Sources: * https://www.imf.org/en/Publications/WEO/Issues/2018/09/24/world-economi… * http://www.oecd.org/eco/outlook/economic-outlook/ * https://in.reuters.com/article/us-funds-bridgewater/bridgewaters-jensen… * https://www.goldmansachs.com/insights/pages/us-outlook-2019.html * https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/economi…
you've been on an absolute tear with your posting, welcome to the forum.
quick question though, how do you square your views with the fact that most of those organizations are notoriously terrible at forecasting? you have better luck at keno than you do with the IMFs economic forecasting team
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