Wealth Daily Perspective: What happens when the next recession hits?

It’s going to happen. There’s no way to avoid it. At some point, the U.S. economy will hit a recession. GDP will shrink, earnings will decline, and people will get fired.

That’s how economies work — they expand as businesses invest and people take on debt and buy stuff. And then they seemingly hit a wall, people pull back on spending, and businesses follow suit, and everything tanks for a few quarters.

The only real uncertainty is when. When does the U.S. economy hit that proverbial wall?

Frankly, it doesn’t take a lot of imagination to come up with some catalysts that could send the U.S. economy reeling. Swing a dead cat, and you’ll probably hit several…

There’s China. If that economy seriously implodes, well, that would probably do it…

There’s terrorism. Given the success that the ISIS wing nuts have had getting into Europe, we can’t rule out their potential of infiltrating the U.S. I don’t worry so much about illegal Mexicans coming over the southern U.S. border. I worry way more about terrorists coming in that way…

There’s debt. I don’t mean government debt. I worry more about corporate and household debt. Seems to me we are pretty much at full employment, and the economy can’t grow. What happens when layoffs tick up and employment growth wanes? We could see spending dry up quick, and that S&P 500 revenue chart I shared with you earlier takes a nosedive…

So those are a couple things that could go really wrong. And there are a lot more. To make matters worse, I am having a harder and harder time coming up with positive catalysts for the U.S. economy. We’ve been in an eight-year sweet spot to get some good growth going, and it hasn’t really happened.

Make a note: Goldman Sachs downgraded U.S. stocks to “neutral” this morning. That’s not a sell signal, exactly. And it’s fine if you want to question Goldman Sachs’ motivation for such a sweeping action (could they be short?). But don’t ignore the potential for an increase in headwinds for the economy… and the stock market.

Read the rest here.

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