Should We Prepare for a Recession?

By Shlomo Maital     

  Are we headed for a recession?

  Quick answer: No.   But – why do some experts think we are?

  There are storm clouds.  Trade has been the engine of global growth since Bretton Woods, 1944.  We now seem to have trade wars – countries impose tariffs, trading partners retaliate… end of trade as growth engine.

    Central banks have imposed high interest rates to battle COVID-induced inflation.  They are very slow to lower them – The European Central Bank has begun, gingerly, and the Fed still has not yet begun.

    The Chinese economy has slowed, unable to find growth engines to replace exports and investment.  Chinese consumers are spending only reluctantly.

     I don’t believe this is sufficient to cause recession.  The US economy, always a stalwart growth engine, grows by 3%.  The US deficit is large, pumping demand into the system.  There is huge uncertainty regarding the Nov. 5 elections, but hope for a sane and pro-active House, Senate and President. 

      So, the usual advice – set aside a reasonable nest egg, a sum for a rainy day, live within your means, try not to increase your credit card debt… and watch cautiously.  I don’t believe a recession (two-quarter fall in GDP) is in the cards.