Longbrake Letter

June 2019

As we approach the summer months, business and consumer optimism remains at a high level achieved only at previous cyclical peaks in economic activity. Investor sentiment, however, was dampened by the collapse of the U.S.-China trade negotiations in early May and concern about slowing U.S. and global growth. Stock prices fell initially, but then recovered partially in early June as investors became convinced that the Fed would cut interest rates. If the Fed cuts rates as expected, it will sustain good times for a while longer. However, significant risks are not being addressed, so it is only a matter of time until recession engulfs world economies. Read the letter.

May 2019

May brought the failure of the U.S.-China trade negotiations and the resumption of tit-for-tat tariffs. During March and April, there were signs in the United States and globally that the Fed’s easier monetary policy, Chinese stimulus, and improved consumer, business and investor sentiment had arrested some otherwise slowing economic activity. Continuation of this favorable trend is now at risk. Easy monetary policy, copious amounts of liquidity and government stimulus can boost optimism and sustain economic expansions. But such policy tools rarely solve fundamental economic imbalances and can have perverse effects by creating asset price bubbles. Risks to the U.S. and global economies remain elevated and have even notched up a bit. Read the letter.

April 2019

The gloomy mood at the beginning of 2019 has given way to renewed optimism that economic activity in the United States and around the world will improve as 2019 progresses. This sentiment shift can be traced to easing of U.S. monetary policy, easier financial conditions and Chinese policy stimulus. However, economic activity continues to deteriorate in Europe and Japan. Significant risks persist, but the probability of recession in the next few months has diminished. Read the letter.

March 2019

In his March assessment of the U.S. and global economic outlook for 2019, Maryland Smith's Bill Longbrake observes that U.S. monetary policy easing has reduced the threat of an imminent U.S. recession. However, significant risks remain. Growth continues to slow across the globe with recession risks rising in Europe and Japan. Most expect policy intervention to reverse China’s growth slowdown in coming months, which, if successful, (and that's far from certain), would bolster global economic activity. Read the assessment.

In the March Longbrake Letter, Bill Longbrake updates the discussion of U.S. and global risks that could precipitate recession. While he maintains a “recession watch,” he cautions that the timing of onset is uncertain and it remains possible that policymakers will be able to manage risks and engineer an extended economic expansion in the U.S. Longbrake also examines recent developments in consumer spending, business investment, housing, employment and monetary policy in the March letter. Read the letter.

February 2019

In February’s update to the 2019 outlook, Bill Longbrake describes expected economic outcomes for the U.S. and global economies during 2019 and developments during the first six weeks of the year. He also summarizes risks to the outlook, most of which are negative, although monetary policy risk in the U.S. has moderated. While most analysts expect another good year, but somewhat slower growth, recession risks remain significant. Read the letter.

January 2019

In January’s economic commentary, Bill Longbrake places the U.S. economy on recession watch. Conditions are developing that could lead to recession in the next few months, but those conditions could evolve in ways that keep the U.S. economy on firm footing for a long time to come. Bill examines those risks. He then shows simulations of what could happen to key economic measures, if a recession occurred starting in the fourth quarter. Read the letter.

As was the case in 2018, above potential economic growth continues to be a global theme. However, reflecting growth deceleration in  the second half of 2018, over the course of 2019, global growth is expected to slow gradually and converge to its long-run potential level by the end of the year. Read the letter.

Above potential economic growth continues to be a global theme as global and world economies benefited during 2018 from years of easy monetary policy. Practically all economies grew above potential. However, as 2018 came to a close, global growth momentum decelerated. The slowdown was particularly notable in Europe, China, and emerging economies, particularly those dependent on exporting commodities. Read the outlook assesment.