We have been hearing about this for a while now, but the jury is finally in: Most economists predict this up cycle will end in 2020.
America may have less than two fat years to make hay while the sun is still shining on the economy.
According to a survey of 60 economists by The Wall Street Journal, 59% of private-sector economists say that the U.S. economy will stop expanding in 2020; 22% said the slowdown would come in 2021 and smaller portions of the sample said the recession could arrive in 2019, 2022 or an unspecified later date.
“The current economic expansion is getting long in the tooth by historical standards, and more late-cycle signs are emerging,” said Scott Anderson, chief economist at Bank of the West, who was among those predicting a 2020 recession.
Though a recession is not necessarily imminent, the expansion is almost certainly in its 11th hour, meaning that a recession is absolutely plausible at any point.
“Any year from 2019 onward is in play,” Lou Crandall, chief economist at Wrightson ICAP, told WSJ.
The most likely cause of the recession according to 62% of these economists is the Federal Reserve’s reining in of an overheating U.S. economy. Other possibilities according to at least 5% of economists were a financial crisis, an unspecified bubble burst, a fiscal crisis or disruptions to national trade.
On the topic of national trade, it is clear that the situation is quickly escalating and that economists are right to peg it as a risk factor.
Yesterday after market close, President Donald Trump imposed tariffs on $200 billion worth of Chinese goods. This is the second of three rounds of tariffs Trump has planned for China in the ever-escalating trade war between the two countries, bringing the total tariffs on Chinese goods up to $250 billion.
According to a statement from Trump on Monday, should the Chinese retaliate because of this fresh batch of tariffs, he will levy another $267 billion worth of tariffs on Chinese imports. This morning, China struck back with tariffs on $60 billion worth of U.S. goods. Trump has yet to back down from a trade fight, and will more than likely make good on his promise to clap back with another $267 billion worth of tariffs.
While the previous round of tariffs was structured in such a way as to shield American consumers from acute price increases, this round of tariffs will most likely be felt as they raise prices on consumer products like electronics, food, tools and housewares, according to an article in The New York Times.
All this additional economic angst comes at a time when wages have stagnated despite employment growth, and Americans are ill-prepared for the task of weathering a recession.
In the housing industry, there are already well-entrenched factors keeping people from seeking out financing for homes new and old, and mortgage lenders are feeling the burn.
As we move forward into thinner years, it is important that mortgage players find ways to recession proof themselves. Some are already fattening up for winter by assuming smaller entities, evident in the recent uptick in mergers and acquisitions activity in the space. However they choose to prepare, they need to do it in a hurry.