US Recession May Come Just In Time For Trump’s Re-Election Bid

By Rich Miller
Bloomberg News

WWR Article Summary (tl;dr) Economists warn that a number of factors including higher and rising interest rates, could leave the economy vulnerable to a contraction, just in time for the 2020 presidential campaign.

WASHINGTON

Here’s another reason to circle the 2020 election year on the calendar. It may well be the year of the next U.S. recession.

Hefty tax cuts, stepped-up government spending and robust global growth should help insulate the economy against a downturn over the next two years, in spite of last week’s stock market swoon. That would allow the expansion that began in 2009 to become America’s longest ever.

But after that, watch out, economists warn. Fading fiscal stimulus, higher and rising interest rates, and cresting world demand could leave the economy vulnerable to a contraction, just in time for the presidential campaign.

“2020 is a real inflection point,” said Mark Zandi, chief economist at Moody’s Analytics Inc., in West Chester, Pa.

It’s not only President Donald Trump who needs to worry after claiming his policies of deregulation, deficit-widening fiscal measures and trade protectionism will lift the world’s largest economy out of a decade of mediocre growth. Investors should fret, too. A recession, or more accurately, the anticipation of one, is often the trigger for bear markets in stocks.

Economy watchers admit they don’t have a great track record predicting downturns. Forecasting a recession in 2020 is a “mug’s game,” given all the uncertainties involved, said Krishna Guha, vice chairman at Evercore ISI in Washington.

But what seems clear is this: The fiscal sugar rush that’s ginning up growth in the short run could be setting the stage for a letdown later, especially if the Federal Reserve feels compelled to take away the punch bowl before inflation and asset prices like stocks get too out of hand.

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