2018 Outlook

I still track economic activity and the stock markets in an effort to see as far ahead as fate and the fogs will let me. With less money at risk today than at any time in the past 50 years, you would think I could find better ways to occupy my time. My body parts are not very cooperative, however. And so…

My tea leaves now tell me that real GDP (net of inflation) will fall throughout 2018 from about 2.5 percent to less than 1.0 percent. We could see a mild recession by year’s end. The probability of a stock market pull back of about 10 to 20 percent in mid year is showing up in the data. That is supported by both the Leading Economic Indicator (LEI) index and by an artificial intelligence model.

The current economy has been growing for more than 100 months, nearly equal to the lengthy growth period in the 1990s. There is nothing unusual about a mediocre year in the offing. The current tax bill before Congress, if passed, would almost certainly change this outlook to something much worse.

Stay tuned.