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2019 Could Be Worst Year for Economy Since ’08

Are you concerned that the economy may be weakening?

by Axios | Updated on 12.24.18

A wide swath of market-watchers expect the U.S. economy in 2019 to be the worst since the depths of the 2008 financial crisis, potentially putting President Trump in a hole as he heads into his re-election race.

Flashback: A year ago, we wrote about a rare and enviable trend: synchronized global recovery. Now, we have synchronized global retreat.

Last week was Wall Street's worst in 10 years. If the Dow and S&P 500 finish at their current levels, they'll have their worst December since 1931, during the Great Depression.

  • Bloomberg says the S&P 500 is "one bad session away" from ending the decade-long bull market.

Between the lines: Against that backdrop, many in the financial world were agape when Treasury Secretary Steve Mnuchin tweeted, with no real explanation, that yesterday he had "convened individual calls with the CEOs of the nation's six largest banks."

  • "The CEOs confirmed that they have ample liquidity available," the statement continued.
  • Justin Wolfers, a University of Michigan economics professor, tweeted: "If you wanted to create financial market volatility, this is how you would do it."
  • Bloomberg's headline: "Mnuchin Bid to Calm Markets Risks Making Bad Situation Worse."

The big picture: Almost everything going on in the world is bad for the economy, Felix Salmon and Dion Rabouin point out in Axios Edge, our weekly look ahead for business.

  • A partial list: Trump attacking the Fed ... the trade fight with China ... China's slowing growth ... a possible Brexit catastrophe ... German and Italian growth slowing ... the French presidency under siege.

Chris Krueger of Cowen Washington Research Group, one of the sharpest observers of the collision of Washington and Wall Street, tells me in an email with the subject line, "For the night is dark and full of terrors":

  • "2019 will begin with a partial government shutdown, fragile markets, and leadership vacuums at the White House, Pentagon, Justice Department, United Nations, and Interior Department — at a minimum."
  • "Some might call that American carnage. Nearly every hard policy catalyst in Q1 of 2019 carries significant downside risk."

Another worry, according to Dan Senor, a fund executive and former adviser to Speaker Paul Ryan and Senator-elect Mitt Romney: "If we were to face a real financial crisis in 2019, we will be in much choppier waters than 2008."

  • "In '08, sovereign governments could backstop the crisis in the markets with extraordinary fiscal and monetary measures, and their ability to do so was unquestioned," Senor added. "In 2019, different story."

And Krueger notes how different the U.S. administration is now:

  • "2008 had ... people minding the shop ... like Hank Paulson, Ben Bernanke, Josh Bolten, Steve Hadley, Condi Rice, Bob Gates, and real deputies who all had the implicit trust of both the president and the markets — and worked together to prevent disaster."

Most forecasts reflect the Washington chaos and global slowing:

  • Jon Hilsenrath, The Wall Street Journal's global economics editor, writes: "Most private economists expect U.S. growth to slow in 2019. ... Global economic growth accelerated in sync in 2017. In 2018, as the U.S. accelerated further, Europe, Japan and China all slowed."

Be smart, from Axios markets editor Dion Rabouin: "The market is looking for a hero because everything is terrible right now around the globe."

  • And he notes this dissonance: "Everything is terrible, but the U.S. data is still good so most traders and fund managers are seeing this as a buying opportunity. ... But the algos don't buy it."

P.S. A bit of perspective from Bloomberg: "Even with its 17 percent drop over the last three months, the S&P 500 has risen 18 percent since Election Day."

Go deeper: Axios' Deep Dive on the financial crisis, 10 years later

Axios

Written by Axios

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(49)
  • JTJ
    Voted No
    12/25/2018
    ···

    The economy is cyclical, just like the climate. I’m not concerned about either.

    Like (11)
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  • Lionman
    Voted Yes
    12/24/2018
    ···

    As someone who tends to stick with my employer for long periods (20+ years), I’m concerned that I’ll be working until I die, because our retirement funds are a fleeting dream. They keep hemorrhaging money, year after year. The longer that Gen-Xers have to work, the harder it becomes for the next generation to step up and take their place. A quiet, well-funded retirement is no longer part of the American Dream, as owning a house will no longer be part of the American Dream for Millennials.

    Like (11)
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  • Kari
    12/24/2018
    ···

    I like how Republicans take credit for Democratic successes, while crippling the economy in the same breath. If you want economic progress, pay the workforce enough so they can live with dignity and “pursue happiness” as it were.

    Like (8)
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  • Constance
    Voted Maybe
    12/25/2018
    ···

    All these negative fiscal predictions are NOT HELPFUL !

    Like (1)
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  • TrulyTexan
    Voted Yes
    12/24/2018
    ···

    Funny how this always seems to happen when a certain group takes over. And how another group has to come in and clean it up. I guess 2020 and beyond will tell us if this time we learned the lesson.

    Like (9)
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  • Rob
    12/24/2018
    ···

    @George and @Robert: You guys should realize that calling it fear mongering or otherwise trying to belittle this release doesn’t change the fact that you’re incorrect. Try this one on for size: this report is a moderate, calm and cool assessment of some facts and you guys are the ones spreading falseties, presenting radical irrational ideas, and presenting the implementation of a solution of this crisis. DT had a hand in this shortcoming. The sooner you realize that, the sooner you can drop your undying loyalty to a guy who cares about his image more than he cares about you

    Like (6)
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  • Robert
    Voted No
    12/24/2018
    ···

    More FAKE NEWS from this crap app. Deleted.

    Like (5)
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  • Justin
    Voted Yes
    12/24/2018
    ···

    The Trump crash is coming! Strap in gonna be a hell of a ride ! Will Americans ever get trickle down is just a looser for all but the super rich?

    Like (7)
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  • Delmar
    Voted Yes
    12/24/2018
    ···

    Thanks to 45’s policies and his stupid tariffs it’s causing the whole economy to crash and it’s just a matter of time before we end up in a really bad recession and that will cause massive job cuts and things will be much worse!

    Like (7)
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  • Steve
    Voted Yes
    12/24/2018
    ···

    The market is finally realizing the absurdity of the GOP administration.

    Like (5)
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  • Bernie
    Voted No
    12/24/2018
    ···

    It jumped 7000 points since 2016. If it loses half that it is still up. Corrections happen. Tech is wildly overvalued. Bit coin is a joke and governments worldwide are still spending too much on social engineering and less on paying for it.

    Like (3)
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  • Jeanne
    Voted Yes
    12/24/2018
    ···

    The weak economy started with the tax scam and is totally owned by 45 and the republicans. Hang on tight. Could be worse than when bush was asleep at the wheel.

    Like (3)
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  • Linda
    Voted Yes
    12/25/2018
    ···

    Funny. When the republicans leave office, they leave behind a financial mess for the democrats to clean up. I guess the republicans are just messy spenders.

    Like (3)
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  • James
    Voted Yes
    12/25/2018
    ···

    Dow Jones is telling use something is coming it’s not good

    Like (3)
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  • Chuck
    Voted No
    12/27/2018
    ···

    President Trump has done great work to improve our economy and keep the stock markets up especially after 8 years of Obama’s smiley Saul Alinsky assault on economy and work force as he said so Proudly those jobs will not be coming back BUT thank God President Trump is bringing those jobs back!

    Like (2)
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  • Steve
    Voted Yes
    12/24/2018
    ···

    Just a thought. Republicans don’t want to hold Donnie to account for fear of angering their base. But if they let things continue apace and the economy tanks, their base will be the most likely to ditch them. I’m thinking integrity and their word to uphold their constitutional duty is a bridge too far so we’re left with self serving motivation. I’ll take that, lol. But the final question is do we really want legislators that are so weak and spineless serving us?

    Like (2)
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  • David
    Voted No
    12/24/2018
    ···

    The economy is on a cycle of it’s own, that occasionally reflects, but more often defies executive branch decisions. Read the history. The economy performed better under Clinton and Obama, than either of the Bushes or Trump.

    Like (2)
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  • Alex
    Voted No
    12/25/2018
    ···

    Fake news.

    Like (2)
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  • Poli.Sci
    Voted Yes
    12/24/2018
    ···

    Ever since my dad’s family crisis failed to rebound after the financial crisis of 2008/9, so many have said the economy has been much better but I fail to see how that is possible. More and more people are saving their money and spending far less than they were in the early 2000s. As of late, wage growth has slowed tremendously and this affects the weirder economy. Yeah the economy looked good on paper and in the stock markets but on the ground where the real evidence lies, there is no truth to this matter. The increasing cost of living in most places far exceeds wages and the fact that Democrats are calling for more spending and higher taxes only makes people more skeptical of government. Not to mention the Fed bringing interest rates back up to pre-recession limits, these are all causes for deep concern. Heck my wife and I can’t even find a reasonable house for sale in our area unless if you can get a loan for over 300k dollars for a decent house, or spend 150k on a house and an additional 100k at improving it. It’s not a market for the well-off but a market for the banks to make people borrow at higher levels they can’t afford, which is the buyer problem and not so much the banks.

    Like (2)
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  • Alex
    Voted No
    12/25/2018
    ···

    Fake news and fear mongering doesn't do anyone any good.

    Like (2)
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  • Sandra
    Voted Yes
    12/26/2018
    ···

    Is it my imagination, or does the economy tank whenever a Rep. is in power?....Just asking.

    Like (1)
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