The Yo-Yo Years

Lakshman Achuthan of the ECRI came out in March with an outstanding analysis in which he continues to build his case that a recession is imminent.  In his analysis The Yo-YoYears he tackles the debate on getting to sustainable debt levels and the critical assumptions that people are making which he deems "highly questionable".

Here are the main points I took away from Achuthan's report, full read here which is well worth the time

• (Referencing charts within his analysis) Where we want to see higher trend growth we have the opposite, a pattern of lower and lower trend growth during expansions for decades now.  And where we want lower cycle volatility we have it running up to multi-decade highs.
• Once you have falling trend growth alongside cyclical volatility, the inference is clear this combination virtually dictates more frequent recessions.  so for the next 5-10 year we're going to have to deal with this challenge
• The idea of "decoupling" often comes up as a way for one part of the world to dodge weakness elsewhere.  But, over the last two decades, a key driver of the greater coupling economic cycles had been the increasing interdependence of world economies, with more openness in the flow of capital and trade - especially merchandise trade.
• So smaller shifts in end consumer demand growth translate into larger fluctuations in intermediate goods demand, and even bigger ones in input material demand, and especially raw material prices.
• Even in a modest decline in consumer spending growth in developed economies like the U.S. and Europe can help trigger a significant downdraft in the level of demand from suppliers and, in turn, a serious downturn in the level of demand for "suppliers to suppliers."
• This warns against a complacent buy-and-hold mentality.  In fact, the world is a much more dangerous place than many appreciate, but there are still going to be opportunities for investors, as long as they consider the timing of the cyclical risk