Economist Gary Shilling warns savvy investors to prepare now because a recession is most likely going to strike America very soon.
“If there’s a recession shaping up, and there probably is, it’s just a question of how soon it’s going to arrive,” the president of A. Gary Shilling & Co., an economic consulting and investment advisory, recently told ThinkAdvisor.
He thinks the recession will be sparked by what he calls “conventional reasons” such as an unstable housing market, a flattening Treasury yield curve and uncertainty surrounding Trump’s trade policies.
“Bear markets and recessions are mostly the result of the Fed tightening when the economy is exuberant,” he said.
He also wouldn't be surprised if the seemingly endless bull-run in the stock market finally comes to an end.
"Markets die from either of two causes: The Fed jacks up interest rates to the point where they end up killing the economy and precipitate a recession, which is preceded by a selloff in stocks. The other cause is a financial shock, which is what happened with the dot-com selloff and then, of course, with the subprime mortgage collapse," he said.
As for his secret-sauce for investing: "I’m bullish on the dollar, long the dollar. I’m bullish on bonds. I like long Treasuries. I’m bearish on stocks. I think stocks are going down. We have very, very tiny positions in U.S. equities. We’re short the aggregate stock market. We’re short on emerging markets. I think they’re in big trouble."
Meanwhile, the U.S. economy has a greater than 50-50 chance of tipping into a recession in the next two years, according to a model tracked by JPMorgan Chase & Co.
The probability of a U.S. recession within one year is almost 28 percent, and rises to more than 60 percent over the next two years, researchers wrote in a recent note, Bloomberg reported. Over the next three years, the odds are higher than 80 percent, according to the note.
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