Looming Recession?

A recession is the Democrats’ wet dream. They know that an economic swoon would help their chances in the presidential election next year. So what might cause a recession? Certainly the U.S.-China trade war could be a significant factor. In fact, it is clear now that the Chinese now are not going to agree to what day of the week it is until after November, 2020 ... hoping that Trump will be bounced and a squishy Democrat will be then sitting across the negotiating table. Trump clearly knows this and is reducing expectations.

Another possibility is the trade deal with Mexico and Canada ... not as big as China, but still important. Nancy Pelosi is sitting on the USMCA like it is a hard-boiled egg. She will not give Trump a win this close to the next election even if it damages our country. How patriotic!

And, of course, the Fed has a potentially huge roll in how well our economy does. It really screwed the pooch last December when it continued raising interest rates when much of the rest of the developed world had negative rates to stimulate their economies. There then was over a three percentage point differential in rates which strengthen the dollar and hurt exports. Trump’s jawboning has caused Powell to reverse himself and start to lower rates once again ... and to halt quantitative tightening (reducing the money supply). Is the Fed doing too little, too late?

And I am sure that there are other schemes being concocted inside the DNC to shoot our economy in the head ... or at least in the leg. Even though many of the poobahs on Wall Street are liberals, they still like money better ... and there have been times where a falling stock market led the economy down. So if they can nudge the economy down by shorting the stock market, they might just do it. However, they also need to worry about a low-probability whiplash caused by a breakthrough in the trade war. There is a limit to this type of economic manipulation.

We’re all in for an exciting 15-month roller coaster ride. Stay buckled in!