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Risk of a Recession is Growing

Sat, 15th Jun 2019

Central banks and analysts are worried that the US-China trade war could be the final straw that sparks a new global economic crisis.

Analysts fear that 2020 could be the start of a new recession, and that banks lack the tools to prevent this.

There are nine major threats to the economy in play at the moment, with trade wars, migration restrictions, stagnant inflation, and threats to global supply chains being some of the most prominent. The US is at particular risk as the stimulus from the tax legislation brought in back in 2017 has now finished.

The US equity markets had enjoyed some positive sentiment until recently, but now there are more risks in that area too, and central banks are worried that the financial markets may be vulnerable to a flash crash.

Outside of the United States, there are plenty of worries in Europe too. As Brexit approaches and fears mount of there being no deal, this raises questions about the health of the UK economy. Mainland Europe has its own political and financial questionmarks, and central banks in Europe are facing their own challenges and may not be able to serve as a lender of last-resort if needed. A severe shock, even if banks are able to provide stimulus and stability, may push the global economy over the edge just as what happened in 2008.

Add in trade and tech wars, especially surrounding Huawei and other Chinese firms, and we have an economy that is on the bring of some significant changes and challenges. Growth is slowing, and what is needed now is stability.

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