What will trigger the next recession in the US economy?
Something we’re not expecting is a safe bet. Something that sounded good when it was proposed and implemented, but eventually became a disaster waiting in the wings to explode.
The last, “Great Recession” came out of a desire to spur more home ownership, and ended up being the opportunity of a lifetime for developers and mortgage writers to make a ton of money - until it all blew up due to its excesses.
We’ve had nothing but tax cuts since Bush 43, and consequently, we’ve had nothing but deficits and a ballooning national debt. I’d say “this can’t go on,” but in reality, it will continue until it explodes and becomes such a liability that the debt can’t be paid off or down, or, the interest on the loans exceeds expenditures for defense, or social programs, or the discretionary budget items.
From the perspective of the stock market, corporate earnings estimates have been falling for months, which is the primary reason the stock market collapsed in the fall of 2018. The markets are “forward-looking,” generally speaking both discounting the economy before it slows, or anticipating economic expansion before it shows up in corporate earnings reports.
If, and it’s a bit if, the tariffs and trade war contribute to some potential, coming recession, they will only be the catalyst for the event, rather than an outright cause. It, or “they” are already causing corporate profits to lag, and, surprisingly, because they’re not supposed to be impacting small-cap corporations, surprisingly, small-cap corporations and stocks have been negatively impacted.
Nobody can tell the future. That’s a real, serious problems when trying to predict when the economy will tumble, or when the stock market will crash, just as it’s difficult to predict when the economy will suddenly bloom and stock prices will go up. It’s all “macroeconomics” and long-term trends, and only by looking at the bigger, longer-term events can we even see them slipping or gaining traction.