We are in a period of economic uncertainty, with the stock market gyrating, news from Washington (and elsewhere) bombarding us with rosy or dire predictions about the stock market, recession, Brexit, inflation, trade wars, geopolitical instability, interest rate increases, and political turmoil.
So let’s step back and see what the economy and the economists are saying, and separate the noise from a couple of basics. First, we have had the longest recovery from the second deepest recession in modern history. The economy is moving along pretty strongly with very good employment figures, consumer confidence, and spending. This is partly due to the economic stimulus of the tax law changes, increased government spending, and the continued historically low interest rates, none of which will have as much impact in 2019 as 2018.
There may be a counterbalancing increase in infrastructure spending but if it comes, it will not have an impact until 2020. The deficit is now $21 trillion dollars and increasing rapidly. This seems to be acceptable, until it isn’t. When and if that occurs, we don’t know.
With the Federal Reserve focus on inflation, we can expect continued measured increases in interest rates. Health care and private education sectors are still inflating at unsustainable rates, and there are other signs of increasing inflation.
Many economists and corporate executives expect a slowdown in the economy in 2019. Despite this, the United States will likely be a bright spot in the global economy, with US Treasuries up.
Again, corporate executives, in a survey by McKinsey, see both a domestic and global slowdown, 1/3 of US executives are more wary of the economy. 1/2 in developed Asia especially, see a potential downturn. India and Latin America on the other hand, are bright spots. Reasons cited for the decline include changes in trade policy, geopolitical instability, Brexit, changes in the level of trade, and interest rates. On a positive note, 39% expect an improving economy.
Expect the financial markets to continue their volatility and their increased reactions to non-financial news. The best way to stay sane in all of this is to maintain your employability and your earning potential through hard work, valuable skills development, and not spending too much time looking at economic predictions.