after record-long expansion, here’s what could knock the economy off course

After Record-Long Expansion, Here’s What Could Knock the Economy Off Course Experts see the U.S. continuing to grow, but looming risks include trade wars, interest-rate mistakes and the ballooning budget deficit Ships and containers at the Yangshan Deepwater Port in Shanghai last month.

Full Answer

What's the longest economic run on record?

This month marks the 121st month of the economic expansion arising out of the great financial crisis, making it the longest run on record going back to 1854. This cycle, starting in June 2009, breaks the record of 120 months of economic growth from March 1991 to March 2001, according to the National Bureau of Economic Research.

Do economic expansions last longer than recessions?

During the most recent times, economic expansions have tended to last longer. Many investors sell stocks and go to cash at what they consider to be signs and signals of a recession or market drop. These are often false signals such as the near bear market of December 2018 or the inverted yield curve of March 2019.

Is the US in the longest economic expansion in history?

Photo by Enoch Hsiao on Unsplash At 126 months, the United States is in its longest economic expansion in history, breaking the record of 120 months of economic growth from March 1991 to March 2001. The length of the economic expansion does not mean that this economic expansion has to end or that a coming recession has to be larger than normal.

What does the length of the economic expansion mean for investors?

The length of the economic expansion does not mean that this economic expansion has to end or that a coming recession has to be larger than normal. Nor does it mean that investors should get out of the markets. The second longest economic expansion was accompanied by the No-Bear Bull Market of the 1990s.

What happens to the economy during expansion?

Understanding Expansion Expansion: The economy is moving out of recession. Money is cheap to borrow, businesses build up inventories again and consumers start spending. GDP rises, per capita income grows, unemployment declines, and equity markets generally perform well. Peak: The expansion phase eventually peaks.

What caused the economic expansion?

Expansion may be caused by factors external to the economy, such as weather conditions or technical change, or by factors internal to the economy, such as fiscal policies, monetary policies, the availability of credit, interest rates, regulatory policies or other impacts on producer incentives.

When did the economic expansion end?

The Committee announced on June 8, 2020, that the economic expansion following the trough in June 2009 peaked in February 2020. On July 19, 2021, it announced that the trough of the ensuing recession was in April 2020. While the recession was very deep, it was the shortest on record at just two months.

Is the US economy in a recession?

For Americans facing decades-high inflation, record gas prices and ballooning grocery bills, it certainly may feel like it, but most economists say the US economy is not currently in a recession.

Why do economic expansions come to an end?

The peak phase occurs when the economy reaches its maximum productive output, signalling the end of the expansion. After this point, once employment numbers and housing starts begin to decline, leading to a contractionary phase begins.

What affects economic growth?

Economists generally agree that economic development and growth are influenced by four factors: human resources, physical capital, natural resources and technology.

Why can't economic expansions last forever?

The expansion of credit in the banking system sets in motion the cycle of boom and inevitable bust. This creates a temporary illusion of a strong economy as prices and spending across the economy rise, but because the plans of investors, consumers, and savers are fundamentally in conflict, this illusion cannot last.

What caused the economic boom after WWII?

Driven by growing consumer demand, as well as the continuing expansion of the military-industrial complex as the Cold War ramped up, the United States reached new heights of prosperity in the years after World War II.

How did the economy affect COVID-19?

The majority of jobs lost in the crisis have been in industries that pay low average wages, with the lowest-paying industries accounting for 30 percent of all jobs but 59 percent of the jobs lost from February 2020 to October 2021, according to Labor Department employment data.

Will we have a recession in 2022?

USD/bbl. The US economy is likely to slow in 2022 and 2023 but will “narrowly avoid a recession” as the Federal Reserve implements its rate-tightening plan to curb inflation, the International Monetary Fund said.

Will there be a recession in the US in 2022?

The US economy will likely fall into a mild recession by the end of 2022 as the Federal Reserve raises rates to tame prices, according to economists at Nomura Holdings Inc.

Are we in inflation or recession?

Consumer prices in the U.S. are running 8.3% higher than last year, and higher costs for critical items, including food, fuel, and housing, are grabbing the attention of every American. Unlike inflation, which is very much a reality, we are not in a recession yet, or at least not officially.

What are the odds of a recession in the next year?

Economists surveyed by The Wall Street Journal recently put the odds of a recession in the next year at 14 percent .

Why was Chevron found guilty of contempt of court?

That is partly because it would take a fairly substantial shock to knock the economy off course.

How will Trump's tariffs affect consumers?

Trump’s tariffs could also increase consumer prices by limiting cheaper imports from abroad. “We already had a tight economy, and then you add fiscal stimulus, and then you add on top of that trade protections,” said Torsten Slok, chief international economist for Deutsche Bank.

Who is the head of the National Economic Council?

Trump’s economic advisers — including the incoming head of the National Economic Council, Larry Kudlow — have played down the threat of inflation, and Mr. Trump has indicated in the past that he would like the Fed to keep interest rates low.

Will inflation cause a recession?

If inflation does pick up, it will not result in a recession overnight. The impact of a potential trade war is harder to assess. The tariffs announced by Mr. Trump so far are small and unlikely to have much effect on the overall economy.

What is the longest economic expansion?

This is now the longest US economic expansion in history 1 The U.S. is officially in its longest expansion, breaking the record of 120 months of economic growth from March 1991 to March 2001, according to the National Bureau of Economic Research. 2 Starting in June of 2009, this record-setting run saw GDP growing cumulatively by 25%, far slower than previous expansions. 3 While the unemployment rate has dropped to 3.6% in May, the lowest since 1969, job growth has been relatively slower than during other postwar recoveries.

How long was the economic growth cycle?

This cycle, starting in June 2009, breaks the record of 120 months of economic growth from March 1991 to March 2001, according to the National Bureau of Economic Research. Perhaps because of the overhang of the housing crisis, this run has been weaker than past expansions in total.

What was the second longest economic expansion?

The second longest economic expansion was accompanied by the No-Bear Bull Market of the 1990s. During this time there were several corrections where the market dropped more than 5% but less than the 20% required to be a bear market.

How long does a recession last?

In contrast, recessions are not disastrous. On average, they only last about 15 months. Here is a longer historical graph from a CNBC article . written July, 2019 when the expansion first broke the previous record. During the most recent times, economic expansions have tended to last longer.

How many recessions were there between 1929 and 2008?

Between 1929 and 2008, the United States had 14 recessions. That averages one recession every 5.6 years. Even if you could have anticipated every recession, jumping out of the markets every 5.6 years would have been a disastrous investment strategy. MORE FROM FORBES ADVISOR.

Do economic expansions last longer?

During the most recent times, economic expansions have tended to last longer . Many investors sell stocks and go to cash at what they consider to be signs and signals of a recession or market drop. These are often false signals such as the near bear market of December 2018 or the inverted yield curve of March 2019.

How long has the US economy been growing?

A ROUND THE world investors, businesses and central bankers are grappling with a startling fact: at the end of July America’s economy will have been growing for 121 months, the longest run since records began in 1854, according to the NBER, a research body. History suggests there will be a recession soon.

What caused the 20th century recession?

A third of America’s 20th-century recessions were caused by industrial slumps or oil-price shocks, according to Goldman Sachs. Today manufacturing is just 11% of GDP and each dollar of output requires a quarter less energy than in 1999. Services have become even more vital, at 70% of output.

What would happen if the Fed cut interest rates to zero?

If, by contrast, the Fed has to cut rates to near zero for a prolonged period to sustain growth, it could weaken the banks, as Europe has found.

Is inflation subdued?

Inflation is remarkably subdued. These forces mean that a placid expansion can continue well beyond historical norms, but also suggest that the way it will eventually end will be different. Recessions used to be triggered by housing bubbles, price surges or industrial busts.

Does the Fed keep inflation at 2%?

The Fed’s credibil ity helps, too—most people believe that it can keep long-run inflation at about 2%. Given that racing prices are less of a worry and that it lacks the ammunition to deal with a serious downturn, the Fed is being more active at signalling that it will ease policy when growth dips.

Is the yield curve a good indicator of recession?

A large chuck of the financial economists around the world regard the yield curve as one of the best recession indicators out there. Presuming they are correct (on this one they might be right), the yield curve still has some way to go before inversion, perhaps placing the next recession 3 years off.

Is there still room to grow before a recession?

Overall, although the current economic expansion is by no means short, there's still some room to grow before a recession is readily apparent in the data. If the indicators presented here are indicative of this decade, the next recession might be more than 2 years off.

The Longest Expansion in U.S. History

The following chart (Exhibit 1) shows the number of days between each recession from October 1928 to the present. For example, the most recent recession ended 5/31/2009 (left axis at bottom). Since then, as of June 13, 2019, 3,665 days or 10 years have elapsed. The previous record was 3,654 days between the 1991 and the 2001 recessions.

Positive Signs

The economy has slowed a bit in recent months, which is not unusual as it ebbs and flows. But we need more data to identify a trend. Here’s a look at GDP, unemployment, inflation, and the Fed.

Recessions and Stocks

Before we discuss how stocks typically react to a recession, it should be noted that stock prices may rise or fall when the economy is strong. Therefore, the strength of the economy does not always indicate how stocks will perform.

Conclusion

Fact: The economy is not a reliable predictor of stock prices, except when it falls into recession. Then, slower economic activity tends to reduce corporate profits, pushing stock prices lower.