2020: An Election Year Recession?

Written by Swiss America

Recession christamsElection Year Recession? -Levisohn/Barrons
"President Donald Trump said that he'd be happy to wait on a trade deal until after the 2020 election. Did he just make a 2020 recession more likely, and in an election year at that?....My main argument...The economy isn't nearly as strong as it looks and a soft landing is not assured....

Yesterday's November's ISM manufacturing index showed a decline in manufacturing activity, not a rebound. And then today, trade fears returned after having been calmly swept into the corner. The latter is particularly bad for the bullish narrative, and stocks have reacted accordingly. But how realistic is a 2020 recession, particularly since it is an election year?...In a note released last week, Societe General's Stephen Gallagher argued that there wasn't much room for monetary stimulus - the Fed already cut interest rates - or fiscal stimulus - tax cuts have already ballooned the deficit. And with a divided government, it's highly unlikely an agreement can be reached until after a recession has started, he continues. The good news is that a recession during an election year is very unlikely. Since 1950, only two have started during an election year: In 1960 - when John F. Kennedy beat Richard Nixon - and 1980 - when Ronald Reagan beat incumbent Jimmy Carter - according to Dow Jones Market Data Group. We'll give an honorable mention to the Financial Crisis, which earned its name in 2008, even though the recession actually started in 2007. That puts the odds of a recession during an election year at 17.6%."

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