2020 Vision: Long Live the Expansion
The US expansion is more than five years old, but business cycles don't die of old age. Herein we discuss why this could be the longest US expansion ever, and how to gauge when it could end.
We believe a prolonged period of deleveraging in the US, coupled with an uneven global recovery, are just two of the reasons why this could prove to be the longest US expansion – ever. Supporting our theory are:
* The world economy is not in sync. Major regional economies are at different points along the growth cycle. In general, DM is leading while EM is lagging.
* Volatility in the US continues to trend lower, which can extend the life of expansions.
* Deleveraging in the US is ongoing, albeit largely complete, and balance sheet priorities have shifted.
* Interest payments on debt burdens are ultra-low, and household debt dynamics suggest there exists a sizable cushion protecting consumers in a rising interest rate environment.
* Capital spending and inventories do not look stretched.
* Corporate management hubris and other corporate metrics of overheating remain muted.
* Several broad economic indicators in the US have only just reached “normal” expansionary levels and are far from looking unsustainable.