Entering text into the input field will update the search result below

Quick Take: Recession Risks Tick Up


  • Given that U.S. exporters have already been under pressure from the impact of the "trade war," the current outbreak could lead to further deterioration of exports to and from China, South Korea, and Japan.
  • The problem with most of the current analysis, which suggests a "no recession" scenario, is based heavily on lagging economic data which is highly subject to negative revisions.
  • The compilation of the data all suggests the risk of recession is markedly higher than what the media currently suggests.

Over the last couple of months, there was a slight uptick in the economic data, which lifted hopes that a "global reflation" event was underway.

As we have been warning for the last couple of months in our weekly newsletter, the ongoing collapse in commodity prices suggested a problem was emerging that trailing "sentiment" data was clearly overlooking. To wit:

"There are a few indicators which, by their very nature, should be signaling a surge in economic activity if there was indeed going to be one. Copper, energy prices, commodities in general, and the Baltic Dry index, should all be rising if economic activity is indeed beginning to recover.

Not surprisingly, as the "trade deal" was agreed to, we DID see a pickup in commodity prices, which was reflected in the stronger economic reports as of late. However, while the media is crowing that "reflation is on the horizon," the commodity complex is suggesting that whatever bump there was from the "trade deal," is now over."

Importantly, that decline happened before the "coronavirus," which suggests the virus will only worsen the potential impact.

I want to reiterate an important point.

The risk to the market, and the economy, is not "sick people." It is the shutdown of the global supply chain.

China is a substantially larger portion, and economically more important, than it was in 2003 when SARS hit. As noted by Johnson & Palmer of Foreign Policy:

"China itself is a much more crucial player in the global economy than it was at the time of SARS, or severe acute respiratory syndrome, in 2003. It occupies a central place in many supply chains used by other manufacturing countries-including pharmaceuticals, with China home to 13 percent of facilities that make ingredients for U.S. drugs-and is a voracious buyer of

This article was written by

Lance Roberts profile picture

After having been in the investing world for more than 25 years from private banking and investment management to private and venture capital; I have pretty much "been there and done that" at one point or another. I am currently a partner at RIA Advisors in Houston, Texas.

The majority of my time is spent analyzing, researching and writing commentary about investing, investor psychology and macro-views of the markets and the economy. My thoughts are not generally mainstream and are often contrarian in nature but I try an use a common sense approach, clear explanations and my “real world” experience in the process.

I am a managing partner of RIA Pro, a weekly subscriber based-newsletter that is distributed to individual and professional investors nationwide. The newsletter covers economic, political and market topics as they relate to your money and life.

I also write a daily blog which is read by thousands nationwide from individuals to professionals at www.realinvestmentadvice.com.

Recommended For You

Comments (5)

John R. Clark profile picture
There is no risk of a recession. There is a CERTAINTY of one, and we will only learn about it six months too late.

That is, if our investing strategy depends on accurate predicting of events. It's no good to cheat by revising your forecast of no recession this year, in light of the "unforeseen" disease outbreak. By year end we will either have had at least two straight quarters of contraction, or not. The market will be exactly as it turns out. There you are, no charge!

For long- term investing, the standard wisdom says to keep ready for surprises and shocks. Recently @Lance Roberts made a point that seemed to contradict a well- known tenet but in my view clarified it, usefully. That is: the 4% rule of withdrawals works great in an average market over the average retiree's lifespan. But YOU must never count on your own situation or the world's to come being just like always. This means keeping on hand stable assets to draw on through a long slump, with most of your holdings still in place for income and growth later. It also means (though seldom mentioned on Seeking Alpha) being ready to defer a vehicle purchase or ship's cruise, or dine out less often, when times call for austerity.

As for me and my house, the least of our concerns last week was losing $50K on paper.

Thanks for reading!
Wouldn't it be nice if we got fiscal responsibility and either held rates or actually increased by .25% to start solidifying the economy for the long term and the next generation? Enough with the greed;let's get real here.
Nothing that negative interest rates can't cure. Hardly. We are headed down the exact same path as Japan. Fertility rates continue to fall, the improbability of the Fed being able to raise rates and likely reduction of rates to below zero as the economy falters. The Fed propping up the bond and eventually the stock markets. Government debt going hyper exponential due to Bernism (maximum socialism) and outlying disruptors I would term grey swans.

Not to become political, but any sane, rational investor/consumer/taxpayer has to be wondering what comes after Trump?
Whatever comes after tramp can’t come soon enough and will be much better. Unless of course you like dishonesty, indecency, chaos, incompetence, and authoritarianism.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.