Saturday, December 15, 2018

Why the US economy will likely fall into a recession next year


The U.S. economy will likely fall into a recession next year, according to Liz Ann Sonders, the chief investment strategist at Charles Schwab.
“Well there's 100 percent chance we're going to get another recession,” she said on Friday during an interview on "WSJ at Large with Gerry Baker." “In the next year, I do think trade holds the key.”
The financial markets have been rocky over the past few weeks, with the Dow Jones Industrial Average falling an estimated 10 percent from its peak a couple of months ago. Investors fret about a number of issues that could potentially derail the economy,  most notably U.S.-China trade relations, rising Federal Reserve interest rates and uncertainty over how Britain will exit the European Union.
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The U.S.-China trade war began almost a year ago and has culminated in hundreds of millions of dollars worth of tariffs. President Trump in September imposed a 10 percent tariff on $200 billion worth of Chinese goods, including a 25 percent increase by the end of the year. The Chinese government retaliated with tariffs on $60 billion of U.S. goods. However, tensions between the two countries seemed to have eased this week: China agreed to temporarily slash its tariff on U.S. autos to 15 percent from 40 percent, bringing Washington back in line with other countries.
Sonders said the key to the length of the runway between now and the next recession largely relates to whether the U.S. and China manage to strike a trade balance.
“I think an earnings recession next year is more likely than an economic recession unless we kind of continue down the rabbit whole towards the full amount of tariffs,” she said.

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