AAII Survey: When Will the U.S. Economy Slide Into Recession?

With so much going on in the global economy, especially the U.S. economy, it is difficult to say what will happen next. The bull market has lasted for approximately 10 years and speculators believe that a correction/financial crisis will soon be upon us. The ultimate question is when will the next historical market correction occur?

With everything happening in the global economy, how does one know when it is time to properly adjust their investments? Last week’s member question set out to answer this by asking:

How long do you think it will be before the U.S. economy slides into recession?

Here are the results:

In all, 1,468 readers participated in the survey.

Almost half of those who participated said that the U.S. economy will slide into a recession within the next one to two years. Twenty-one percent of participants stated that it would take two to three years while 18% said the next recession will occur within the next year. Finally, 13% of voters think it will take more than three years to see a decline in the U.S. economy.

Weekly Special Question

Last week, the Federal Reserve benchmark interest rate got cut by 25 basis points—moving the range for the federal funds rate down to 2.00% to 2.25%—when the majority consensus expected a 50-basis-point cut. Fed chairman Jerome Powell also added in his announcements that the Fed will stop reducing its balance sheet starting in August, two months earlier than planned.

The next day, President Trump announced a 10% tariff that will be imposed on the “remaining” $300 billion of goods that are imported to the U.S. The president’s tweet created a market-wide sell-off.

To add to that, we will be undergoing the 2020 presidential election relatively soon. The outcome of this election may alter the U.S. economy’s course, postponing a recession or starting it sooner.

While there are many economic factors sprouting beneath our feet this earnings season, there is no way of knowing what will be the ultimate protagonist pushing the U.S. economy into a recession. With such uncertainty, last week’s billion-dollar question asked:

What do you think will be the primary cause of the next recession?

In total, we received 332 responses. Responses were colorful and plentiful.

Coinciding with the recent news, the majority of members responded with the trade war with China and tariffs to be the largest driver in causing the next recession, with 24% thinking alike.

Next up on the most common cause of the next recession, was national debt. Fifteen percent of respondents believed that the U.S. is continuing to grow the national debt by budget deficit spending.

Fourteen percent felt that President Trump will in some way cause the next recession, which could include tariffs, interest rates and tweets.

Thirteen percent felt that the election of a Democratic president in 2020 would lead to a recession.

Some other issues that members feel could cause the next recession include:

• Geopolitical/global economic events
• Corporate earnings
• Federal interest rates

Here is a sampling of some unique responses our readers left us regarding the driving proponent of the next recession:

• “Tariffs.”
• “The Fed’s focus on lowering the federal funds rate now will exacerbate the situation when the economy starts to turn down. The jockey is beating a horse already running as fast as he can coming around the final turn.”
• “The election of a president in 2020. No matter which one gets elected, the political pumping of the market will cease after the election.”
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