Often, when travelling, kids all around the world drive their parents crazy with the question, ARE WE THERE YET? Some might ask the question as the destination draws near, while others don’t reach the end of the driveway before blurting it out. Our point is that just because the question is being asked, doesn’t mean the destination is right around the corner.
On the question of when the next recession will arrive, we are hearing a lot of people ask, ARE WE THERE YET? What the market is trying to do right now is predict the next recession which is something it’s not very good at doing. Nobel Laureate Paul Samuelson famously proclaimed in 1966 that the stock market had “accurately predicted nine of the last five recessions.” In the 50 plus years since then, stock markets have no more learned to predict a recession than pigs have learned to fly.
We can’t tell you when the next recession will arrive, but we can say that most of the facts do not support a recessionary environment. Here are some of the facts that lead us to this conclusion.
- The Fed is on “pause” and real interest rates are approximately 0%
- Job growth remains robust
- Corporate earnings growth remains strong
- Unemployment rate is low, but participation rate is rising
- Wages rising while inflation remains contained
- Housing starts are not declining
- Leading indicators are positive
- ISM Manufacturing Purchasing Managers Index is above 50 in most parts of the world
Advertisers pay the media to keep us all in a low-grade anxiety so we have no doubt you will see lots of news predicting that a recession has arrived. As difficult as it is sometimes, we need to stay focused on the facts and not be consumed by the noise. By adhering to this principal, we have enjoyed a very good start to 2019.
If you have any questions or comments, please let us know!