Local financial advisor weighs-in on nationwide recession scare

On Wednesday, August 14, the Dow dropped 800 points, sparking concern nationwide over a possible recession in the near future.

Posted: Aug 21, 2019 6:32 PM
Updated: Aug 21, 2019 6:36 PM

(ST. JOSEPH, Mo.) On Wednesday, August 14, the Dow dropped 800 points before rallying again, sparking concern nationwide over a possible recession in the near future.

However, local Financial Advisor Josh Royeton, with Edward Jones, said he doesn’t see a recession happening within the next year.

"Wages are still going up, earnings are still going up - albeit at a slower pace, but it's still going up,” Royeton said. “So, we do think that the fears have kind of out-run the reality a little bit."

Economists have told ABC News that President Donald Trump’s recent tariffs on Chinese goods could be a factor in the drop.

"The trade war is slowing things down,” Royeton said. “China's economy is slowing down a little bit. They're technically in a recession because of where their growth rate has to be higher than ours, and so they have slowed down a little bit."

Though the President has remained consistent in his statements, saying the economy stands in good condition.

"Our economy is the strongest in the world by far, nothing even comes close,” President Trump said. “A lot of good things are happening."

But, a newly released survey by U.S. Business Economists finds that 34 percent believe there will be a recession by 2021.

"They do think 2021, but we should be solid for the rest of 2019 through 2020. But 2021, that's when we start to be a little more concerned,” Royeton said.

He added that even while certain signs are pointing to a possible recession by that time, the data could still be incorrect.

“The recession seems to be continuously two to three years out, so we could get to 2021 and be like ‘oh, it looks like 2024 now.’ Hopefully that’s the case, it just keeps extending,” Royeton said.

ABC News has also reported that White House officials have considered tax cuts to counter a possible looming recession.

“We're looking at various tax reductions, but I'm looking at that all the time anyway, tax reductions, that's one of the reasons we're at a strong economic position,” President Trump said on Tuesday. “We're the number one country anywhere in the world by far.”

The President then went back on that statement on Wednesday.

"I'm not looking at a tax cut now, we don't need it, we have a strong economy,” President Trump said.

Another factor that has caused fear of a recession to spread is the yield curve. Economists said the yield curve, which shows the spread in investment returns on different U.S. government bonds, went haywire for the first time since the Great Depression. News reports show the curve has inverted twice since the Dow dropped.

“It historically has worked for about the last 50 years, maybe 60 years as a pretty good indicator of when a recession is coming,” Royeton said.

He added that as investing trends continue to change and adapt, the yield curve might not be as effective at predicting a recession as in the past.

“We think it may have changed a little bit because you have quantitative easing, in recent years you’ve had the feds start to cut rates, you’ve had European central banks start to cut rates,” Royeton said. “So, it’s not quite as easy as looking back and saying ‘oh, it happened in the 80’s so it’s going to happen now.”

While Royeton doesn’t believe a recession is imminent, the national scare has caused many people to be concerned over their investments and 401Ks. The financial advisor said if you’re having doubts, just double check that you’re heading in the right direction.

"I would say sit down, really review your risk profile and really figure out if you need to make any adjustments,” Royeton said.

He added that investments and financial portfolios could be different for younger generations than older ones.

“If you’re near retirement, your portfolio should probably be even more conservative and less aggressive than if you’re just starting your career,” Royeton said. “If someone’s 22, 25, even 30 and they’re just kind of getting started, really aggressive is the way to go for most people.”

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