As I keep saying, the one thing that would absolutely end Donald Trump in 2020 is an economic recession, and America got another market red alert today that indicates we're careening towards a nasty one right now.
Recession signals intensified Wednesday in the United States and in some of the world’s leading economies, as the damage from acrimonious trade wars is becoming increasingly apparent on multiple continents.
The U.S. stock market tumbled to its worst day of the year on Wednesday, after a reliable predictor of looming recessions flashed for the first time since the run-up to the 2008 financial crisis. The Dow Jones industrial average fell 800 points, or about 3 percent, and has lost close to 7 percent over the past three weeks.
Two of the world’s largest economies, Germany and the United Kingdom, appear to be contracting even as the latter forges ahead with plans to leave the European Union. Growth also has slowed in China, which is in a bitter trade feud with the United States. Meanwhile, Argentina’s stock market fell nearly 50 percent earlier this week after its incumbent president was defeated by a left-wing opponent.
Whether the events presage an economic calamity or just an alarming spasm are unclear. But unlike during the Great Recession, global leaders are not working in unison to confront mounting problems and arrest the slowdown. Instead, they are increasingly at one another’s throats.
And President Trump has responded by both claiming the economy is still thriving while dramatically ramping up his attacks on Federal Reserve Board Chair Jerome H. Powell, seeking to deflect blame.
Wednesday’s sharp sell-off was caused by an unusual development in the bond market, called an “inverted yield curve,” that often foreshadows a recession.
For the first time since the run-up to the Great Recession, the yields — or returns — on short-term U.S. bonds eclipsed those of long-term bonds. Normally, the government needs to pay out higher rates to attract investors for its long-term bonds. But with so many losing confidence in the near-term prospects of the economy and rushing to buy longer-term bonds, the U.S. government now is paying more to attract buyers to its 2-year bond than its 10-year note.
That inverted yield curve usually precedes a recession by about a year, which would be lethal to Trump's reelection prospects if that holds true. I say "usually" because the yield curve first inverted in December 2005 before the Great Recession, and it basically took two years for that to happen.
We'll see what happens, but with the Trump regime running things, I would expect that massive recession sooner rather than later.