Is a Recession Coming? 3 Signs of a Stock Market Crash in 2019/2020

Hi, and welcome to The Motley Fool’s Bottom
Line series! In this episode, we’re going to take a look at a few signs that indicate
that the U.S. may be headed for a recession, and what that means for the U.S.
economy and the stock market. A decade ago, things were looking pretty dire.
In October 2009, the U.S. unemployment rate peaked at 10%. The Federal Reserve was scrambling
to incite calm in a very jittery stock market and U.S. economy. Just seven months earlier,
the Dow Jones Industrial Average, NASDAQ Composite, and broad-based S&P 500
all hit multi-year lows. But things have rebounded in a big way over
the past decade. We’re currently in the midst of the longest expansionary period for the
U.S. economy in recorded history. The unemployment rate is at a nearly 50-year low, and the Dow,
NASDAQ and S&P 500 have all hit record highs since the Great Recession. Unfortunately,
all good things must come to an end. Right now, there are a few red flags indicating
that there could be trouble ahead for the U.S. economy and the stock market. 
The first red flag is the inverted yield curve. A yield curve and version happens when longer-maturing
bonds have a lower yield than shorter-maturing bonds. Generally speaking, short-term bonds
should have lower yields than long-term bonds. After all, if you’re giving up your money
for a longer period of time, you expect to be paid more for doing so. But over the past
couple of months, the two-year and 10-year Treasury note swapped places a few times,
with the two-year note bearing a higher yield than the 10-year, which is known as an inversion.
Every single recession in the U.S. economy since World War Two has been preceded by an
inversion of the yield curve — although, it’s important to note that not all yield
inversions have necessarily been followed by a recession. Nevertheless, inversions don’t
come about unless there’s some serious concern about the health of the U.S. economy. 
A second concern for the economy is the current contraction in U.S. manufacturing. The Institute for
Supply Management releases its Purchasing Managers’ Index every month, which is a gauge
for how the manufacturing sector is doing in the U.S. In September, the PMI fell to
47.8%. That’s the lowest percentage it’s been since June 2009, and any reading
below 50 signals a contraction. There’s little doubt that the ongoing trade
war between the U.S. and China is the biggest headwind in this confidence collapse in manufacturing.
Peter Boockvar, the chief investment officer at Bleakley Advisory Group, recently said
that we have now tariffed our way into a manufacturing recession in the U.S. and globally. The U.S.
and China have been trying to work out a long-term trade deal for more than a year now,
with tariffs being imposed on and off for the past 15 months. There’s simply no quick fix to
the trade war, and the longer it lingers, the more U.S. manufacturing may suffer. 
Lastly, history would suggest that the stock market and U.S. economy are primed for a recession.
Despite more than 10 years of expansion, there’s a good probability that a recession will happen
sooner rather than later. The U.S. has had 14 recessions over the past 90 years, or about
one every six and a half years. Even though the U.S. economy doesn’t stick to averages,
this long-term data is pretty clear that recessions are a natural and unavoidable part of the
economic cycle. We also know that stock market corrections are perfectly normal. In fact,
the S&P 500 has had 37 corrections of at least 10% since 1950. The bottom
line is that no matter what the U.S. economy has historically thrown at the
Dow, NASDAQ, or S&P 500, they’ve always bounced back stronger than they were before.
That’s why long-term investors continue to be rewarded for their patience. 
Thanks for watching this video! Do you think the U.S. economy is headed for a recession
in 2020? Let us know in the comments below. If you liked this video, click the thumbs
up button and hit subscribe. It helps us to reach more people, which allows us
to make more awesome content.

25 Replies to “Is a Recession Coming? 3 Signs of a Stock Market Crash in 2019/2020”

  1. As TMF has stated market crashes are corrections. Like volcano's it's not a matter of if but when. They are inevitable. They are not the same as recessions but painful none the less. Since we don't know if we are in a recession until it's almost over, one can sit on their hands and hope we aren't there yet or wake up to reality and plan for it. Thanks TMF for the great advice you always provide.

  2. It's not just coming, it's going to be here sometime next year, and going to be at least as bad as the Bush recession.

  3. I’ve been able to make a million dollars from my investment of $350,000 with Marilyn Su Thuyen, the market crash is Fugazi, the experts know better.

  4. Yes,it's obvious.2008 uusa used the last tools to rescue the system.Next time only china can rescue the economic system .Wait and see.

  5. very well could be,Trump gets reelected, ,let us presume, then with the election over ,the recession may start. of course, inflation expectations, full employment, credit ,commercial paper need to be in the cross hairs.

  6. I believe that we are now in a recession which may just deepen. Some of the signs are the ongoing trade war between USA and China. Then as a consumer you only need to go shopping and see how the prices of everything have gone up, then take a walk around home depot, lowes and stores and the sales are not good. Also, home depot and lowes have been cutting staff and leaving customers, the only few left without true assistance. I believe we are in a recession right now and it will only deepen, I hope I am wrong!!!

  7. If the Democrats get in we are going to become a socialist country sooner rather than later and hyperinflation will hit and our economy will never recover. If the Republicans retain control there will be a massive correction and a slow death spiral for the USD. Either way we are screwed because the USD is a worthless fiat currency that is backed by nothing. The problem is that there is no place to hide. The entire world economy will get pneumonia when the US catches a cold. A very few will become ultra-rich and everyone else will become poor.

  8. It's been a long time so it seems like it can't be that far off, although it seems we may be in a Goldilocks economy, at least for now. Good info. Thanks Motley Fool.

  9. Dude thanks for keeping it short and to the point, I can not stand a 30 minute video to say 3 minutes of SHIT !!!! thanks again 👍

  10. The chances of a recession are minimised by the fact that history has taught everyone (including all the banking sectors) that proper structures must be put in place, so as to defer the chances of another recession in modern times occurring again.

    Societies throughout the world suffered greatly from the 2008-09 recession that hit so suddenly. Better parameters have been constructed so as to detect oncoming signals of a major downturn once again. That’s not to say that there won’t be another recession, even next week, but preparedness will be the glowing factor next time. We may have an easier time to slide all our savings into ‘cash’ once the alarm bells ring. Let’s hope so.

  11. Alot of people say buy gold buy silver,I get it but where do I redeem it???Is a gas station gonna take it?A grocery store??Is nobody gonna take cash in a recession???

  12. If we enter another recession, will it affect housing prices like the 2008 recession? Are property values going to plummet again?

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