April 23, 2018
In all the hoopla about economic growth and decreasing taxes, we’ve forgot about what may loom in the future.
Remember the next recession and market correction? When will those begin?
Simply put, the rubber band is stretched too tight.
Consumer spending, which accounts for 70 percent or more of the economy, is slowing. Plus, consumers have all the debt they can handle. And with savings rates woefully low, things don’t look pretty.
But that somewhat flies in the face of what we’re hearing about the economy. We see low unemployment and job gains in many sectors, retail included.
Then again, we also see retail giants like Walmart, Target and Kroger performing poorly and issuing weak guidance during investor meetings. Kroger specifically mentioned shrinking margins.
Unfortunately, such conflicts are not exclusive to retail.
The construction industry added 70,000 jobs, which doesn’t coincide with rising mortgage rates, increased traffic around the nation, and declining pending home sales.
Manufacturing job gains will likely suffer due to tariffs and trade wars. And in the automobile world, a pending tsunami of tens of millions of lease cars being turned back in is on the horizon. Yet, manufacturers are hiring and maintaining high production levels.
Accordingly, the recession sensors are blinking, and the outcome depends on the political reactions.
A recession before 2020 likely means President Trump is a one-term president. Democrats will then run on a platform of deficit reduction, but likely through tax increases, not spending cuts.
In all, it means the next few years could be instable. Buckle up.