Last year, the talk was all about recession. Which is why it may have surprised many to learn that 2019 was the stock market’s best year. It may seem ironic that fears of recession gave way to record breaking performance, but as I wrote in my piece, “What if Everyone Saw the Recession Coming,” we should treat with some skepticism the idea that the entirety of the financial media is ever right. Indeed, the only time they ever are in agreement it’s usually because they are all wrong.
The charitable explanation for the lack of a recession is that all the warnings caused the markets to push for stimulus. The Fed not only held interest rates, but lowered them. In a slightly more worrying sign the Fed continues to provide the banks with up to $120 billion in the overnight lending markets, signaling cash flow problems that were initially dismissed as a function of corporate taxes coming due but clearly have lingered into the next quarter.
Now the talk has shifted to 2020 and whether a recession may be just around the corner. There are a few reasons to remain skeptical. First, it’s an election year and Trump will likely do anything to prevent one. We’ve already seen him bully the Fed into lowering rates (even if it was the result of Trump’s self- instigated trade wars, not his tweets). Second, as Janet Yellen argues economic growth doesn’t die of old age, but rather, as Ben Bernenke put it, gets murdered. Something needs to happen, and while Trump has certainly introduced significant economic chaos, it’s not clear any one of those is currently enough to drive a recession (though it could spin out of control). Finally, there’s just the fact that by definition recessions tend to be unpredictable. The idea there would be uniform clarity in seeing it coming seems hubristic.
So will there or won’t there? A stopped clock is right twice a day, so it looks like rather than clarity 2020 will bring us the certainty of more waiting and breathless headlines. At least we can be sure about something.