Will We See A Recession in 2020?

Marc D. from Charlotte, N.C. asks: I heard on the news today that a panel of economists think the U.S. is headed for a recession in 2020, and that a majority of them think the trade dispute is a big negative. Does Zacks Investment Management agree, and depending on your answer, how are you planning to manage client assets through a potential recession? Mitch’s Response: Thanks for writing, Marc. For readers that may not be aware of what you’re referencing, there was a story published in the Associated Press over the weekend citing comments from the National Association for Business Economics (NABE). In short, a ‘forecasting’ panel of economists predicted steady growth through 2019, but two-thirds of them determined that the U.S. was headed for a downturn by the end of 2019. 18% of them thought the recession would happen even sooner, at the end of 2019. They cited weak productivity gains, large numbers of baby boomers retiring, and the fading impact of the tax cuts as their reasons.1 --------------------------------------------------------------- [Don’t let fear of a recession or short-term fluctuations determine how you manage your portfolio.]( Instead, focus on strategic thinking and planning by determining an investment strategy that meets your investing needs, risk tolerance and long-term goals. If you have $500,000 or more to invest, learn about five of our top strategies that are ranked in the top 7% by Morningstar (as of 3/31/2018) and see how they could benefit you. [Learn More About Our Top-Ranked Strategies!2]( ___________________________________________________________________________ To answer your question, I’ll give you the Zacks Investment Management (ZIM) outlook and my take. We know now that 2017’s annual GDP growth rate (+2.3%) was notably stronger than 2016’s (+1.5%), and that was even before the tax cut was passed. In the first quarter of 2018, we have a preliminary reading so far of +2.3% GDP growth, signaling a continued and steady output. For 2018 as a whole, we see growth in the range of +2.7% to +2.9%, which is actually in the range set by NABE as well. We see less than a 20% chance of recession between now and the first quarter of 2019.3 My take, and my real answer to your question is that any forecast or prediction that looks beyond 12 months from now is largely irrelevant. The global economy is far too dynamic – and is ultimately driven by far too many factors – to be able to predict with any reasonable accuracy beyond a year from now. To me, not only can it not be done very well, it is simply not a worthy endeavor. Too much can change between now and then. My guess is, if you look at what NABE is saying a year from now, it will be different from what they’re saying today. As for the trade matter, I’d agree that any real escalation of the trade dispute that involves tariffs and restricted trade is a material negative for the economy. The global economy and the U.S. economy are far too interwoven with supply chains, partnerships, and multi-national sales channels, to have tariffs and trade disputes be a positive driver. Costs could rise in unexpected pockets of the global economy, and many businesses may stifle new investment if the environment is uncertain. While I do believe that our trade relationship with China was due for a change and needed fixing, I’m not so sure the benefit of waging a trade battle with some of our closest allies. The effects will need to be measured in real time, as tariffs are actually implemented and we can better gauge how the economy reacts. I do not believe, however, at this time that tariffs would be big enough to derail the expansion. In answer to the second half of your question, “how will we manage client assets through a potential recession?” From an investment standpoint, I think it makes sense to maintain a constructive view of the economy and equities markets looking ahead through 2018 and to position your portfolio accordingly. And that is what we will do at Zacks Investment Management. We focus more on our client’s long-term objectives and preparing them for potential ups and downs in the market over trying to predict the possibility of a recession. With that, we design customized investment portfolios based on each individual’s needs and our market outlook. If you are looking for additional insights on how to manage your portfolio, check out our Dean’s List of investment strategies. This guide looks at five of our top strategies that are ranked in the top 7% by Morningstar (as of 3/31/2018).4 If you have $500,000 or more to invest and want to learn more about these strategies, click on the link below. --------------------------------------------------------------- ABOUT ZACKS INVESTMENT MANAGEMENT Born from Research – Built for Performance Zacks Investment Management was born out of one of the country’s largest providers of independent research, Zacks Investment Research. Our independent research capabilities from our parent company truly distinguish us from other wealth management firms - our strategies are derived from research and innovation, including the proprietary Zacks Rank stock selection model, earnings surprise and estimate revision factors. At Zacks Investment Management, we work with clients with $500,000 or more to invest, and we use this independent research, 35+ years of investment management experience, and tools we’ve developed to design customized investment portfolios based on each client’s individual needs. The end result is investment management that is research driven, results oriented and client focused. WANT TO LEARN MORE ABOUT ZACKS INVESTMENT MANAGEMENT? Here are three ways to get started: 1. Phone Us: 1-800-701-9830 2. [Go to our website at www.ZacksPCG.com]( 3. [Schedule a time to talk with]([us]( © Zacks Investment Management | [Unsubscribe]( 1Associated Press, June 4, 2018, Business economists worry about possible recession in 2020, 2 Returns for each strategy and the corresponding Morningstar Universe reflect the annualized returns for the periods indicated. The Morningstar Universes used for comparative analysis are constructed by Morningstar (median performance) and data is provided to Zacks by Zephyr Style Advisor. The percentile ranking for each Zacks Strategy is based on the gross comparison for Zacks Strategies vs. the indicated universe rounded up to the nearest whole percentile. Other managers included in universe by Morningstar may exhibit style drift when compared to Zacks Investment Management portfolio. Neither Zacks Investment Management nor Zacks Investment Research has any affiliation with Morningstar. Neither Zacks Investment Management nor Zacks Investment Research had any influence of the process Morningstar used to determine this ranking. These rankings may not be representative of any one client’s experience. In addition, they are not indicative of future performance. 3 Zacks Investment Management's May/June 2018 Stock Market Outlook Report 4 ZIM may amend or rescind the “Dean’s List of Investment Strategies” guide for any reason and at ZIM’s discretion. DISCLOSURE Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. 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