Last week saw J.P. Morgan and Co. release its highly anticipated J.P. Morgan Private Bank Spring Investment Barometer. This yearly survey considers over 700 private global clients throughout Europe, the U.S., and the Middle East. The relevant clients they are surveying here are HNWI’s, or Ultra-high net worth individuals. These people must possess at least $30 million worth of liquid financial assets.
According to the survey results of this group of HNWI investors, 75 percent of them anticipate a recession in the United States by the year 2020. A fifth of those expecting financial downturn believe this recession will start in 2019. Another 50 percent see it unfolding in 2020. In either case, it is an ominous forecast from the smart money wealthy types of the world.
This sort of prediction could be surprising to you if you have seriously followed financial media lately. They stay busy reporting on the lowest level of unemployment for the past 17 years, the strong corporate earnings, and the solid growth across the United States these days. Even the International Monetary Fund recently increased its forecast for American growth to 2.9 percent in 2018. The chart below makes their position for this year and the next quite clear:
Yet the IMF also sees conditions deteriorating in 2020. Economists also debate if the growth will continue past 2019. It has been short term boosted by the Tax Cuts and Jobs Act as well as the enormous government spending package passed earlier this year. The effects of the tax cuts and the additional government purchasing will start to taper out by then.
Northern Trust Economist Carl Tannenbaum falls into this camp thinking that the economic growth will not be able to match the rising pace of the American federal budget deficit. The Congressional Budget Office has revealed that this will surpass a trillion per year within the coming two years. Tannenbaum warned of these risks not factored in as well with:
“Sometime in the next decade we’re going to have a recession which is really going to throw us off that trajectory.”
Legendary billionaire and Microsoft founder Bill Gates agrees with these assessments. In March of 2018, he answered the question about another financial crisis like the global financial crisis by stating that:
“Yes. It is hard to say when but this is a certainty.”
One telling sign about an upcoming recession has recently appeared. This is what economists refer to as the flattening yield curve. This simply refers to the unusual case where the two year Treasuries’ yield approaches the 10 year yield.
This past week it reached its greatest level and flattest yield curve dating back to 2008. This scenario generally raises fears among investors and economists alike that a recession is in the offing as higher yielding short term yields indicate that interest rates and inflation will both stay lower for an extended time frame.
Is Your Retirement Portfolio Prepared for the Upcoming Next Recession?
The global smart money and ultra wealthy investors are warning about a deterioration in the economy and equities’ markets. On top of this, the Treasuries’ yield curve is sounding alarm bells about a coming recession in the cards. The good news is that you do not have to lose sleep trying to determine when exactly this recession and potential financial crisis will occur. Gold has protected investors from economic uncertainty for thousands of years.
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