Credit: Shutterstock photoIs the Federal Reserve's monetary policy smoothing out the economy to such an extent that small relief recessions no longer occur? Will we only be faced with massive recessions recessions in the future which have more momentum than monetary policy can overcome?
The USA economy is about to begin its ninth year of expansion. It has two years to go to be the longest period of expansion in modern USA post-WW2 history. It also one of the weakest expansions, but at this point is much better than the annual 1.4 % growth seen in the Nov 2001 - Dec 2007 expansion.
It is difficult to forecast recessions. I spend a good portion of my day drilling through data - and I am not seeing any grouping of signs which signal an economic turning point. Even in the periods of strongest expansion, one can always find a single data point which historically foretells a recession. The economy does not work uniformly - there are always components going in the wrong direction. A recent tweet grabbed my attention:
This definitely is not a good data point. It is interesting to speculate on the cause of the low return of equity:
profit squeeze (such as the shakeout now occurring in retail from etailers such as Amazon)
low productivity growth
imports taking sales
too much capacity
is it simply that the stock markets are overpriced from a historical perspective (stock prices determine corporate equity)
Business is becoming less profitable, but remains historically strong.
A significant stock market could create a shock wave that would overcome monetary policy and put the next recession into motion.
Other Economic News this Week:
The Econintersect Economic Index for July 2017 continues to forecast strengthening economic fundamentals - with the index showing normal growth for the third month in a row. Six-month employment growth forecast indicates modest improvement in the rate of growth.
Bankruptcies this Week from bankruptcydata.com: Privately-held TK Holdings (aka Japan's Takata - the airbag maker)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
