US Economy Impending Recession


Impending Recession

In recent years, the US economy has soared to record highs, with the average US household having a net worth of $692,100, about $150,000 more than 10 years ago in 2009. However, market expert Raul Elizalde states that this upward trend will soon change to a downward one, as another recession seems imminent and inevitable. The onset of this recession has been shown through the tech market bubble crash where companies like Apple lost almost 40% of their net worth, and it seems that the rest of the market will follow. Economist Elizalde states that, “Household wealth has doubled in the last nine years, fueled by the quadrupling of stock prices and the full recovery of home values since the depths of the financial crisis. The problem with this is that wealth depends on the ups and downs of asset prices, and therefore a bear market can deliver a hard blow to household wealth. Since the average household income is not strong enough to soften the impact of declining asset prices, a market decline may well lead to households feeling poorer, which in turn will likely lead to spending less. This can deepen a cyclical slowdown and increase the chances of a recession.” While the average household wealth has increased in recent years, the average household income has stayed relatively the same, meaning that most of people’s wealth is composed of assets such as their houses. Therefore, the market is much more susceptible to housing price drops, and in areas such as Silicon Valley, where home prices are nearly double what they’ve been 10 years ago, and a housing crash seems both inevitable and devastating to these areas. Furthermore, the list of issues conspiring against higher asset prices – trade wars, political instability, higher interest rates, etc. – suggests that household wealth is likely to drop. Based on previous and going events, as well as past recession trends such as in 2008, it seems likely that there will be another recession in upcoming years, which the US and rest of the world should be well prepared for.

Source:
https://www.forbes.com/sites/raulelizalde/2018/12/17/another-warning-that-a-2019-recession-is-coming/#1a5a175ed8f3

Comments

  1. AnonymousJanuary 27, 2019 at 4:49 PM

    I agree that the housing price in San Francisco and Bay Area had been increased in recent years. I experienced this when my family emigrated to the Bay Area in 2015. As a result, the recession in the real estate market had already shown in the statistics that the number of homes sold in the Bay Area declined more than 15 percent from last year. This drop in the number of the house sold may be an indicator of another recession in the upcoming year. However, I speculate that the recession in the real estate market may due to other reasons happened specifically in the bay area, and the recession might not spread to elsewhere in America. For example, people working in high tech companies, which are majorly located in the bay area, are harder to get the visa to continue work in the US based on Trump's immigration policies. This caused the loss of population in the bay area. Thus fewer people are willing to buy the sky-rocket price home to stay here. (source: https://sf.curbed.com/2019/1/2/18165468/san-francisco-home-sales-drop-numbers-2018-figures).

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  2. AnonymousFebruary 3, 2019 at 7:46 PM

    This was a really interesting post and the connection between the tech market bubble crash and the current trend in the market is one I had never thought about before. When I looked into the topic further, I found out that the issue goes beyond just household wealth and income. Other factors include the disappearance of low cost housing, a decrease in construction and construction workers, and policies that make the situation even worse. The irony is that while there is a lot of construction in our area, the same can not be said for the rest of the country. In the end, many people are already being impacted by the effects of the market's decline. These issues, combined with the ones you mentioned in your post are creating an environment that could plummet America into another recession.

    Source : https://www.huffingtonpost.com/entry/housing-crisis-inequality-harvard-report_us_5b27c1f1e4b056b2263c621e

    ReplyDelete
  3. AnonymousFebruary 12, 2019 at 2:19 PM

    Housing prices are wild right now and still climbing somehow. I know a lot of people who sold months ago and are amazed that the market is still growing. It is tough to leave thousands on the table, but sometimes it is worth it for the peace of mind and safety that comes with getting out of such a volatile and dangerous market.

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