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When will the next recession hit?

Written on May 1, 2020

By Molly Ryan Kowaleski, OSCPA content & community manager

That’s the question we posed in our quick poll late last week; we wanted to know when CPAs anticipate the U.S. economy will hit a market downturn.

In our completely unscientific poll, 25% thought it could be in the next two years. Voters then split equally between “in the next year” and “in the next five years,” with 21% of the votes each. Nearly 30% said they weren’t sure/don’t anticipate a recession at all.

Our question was based on analysis from expert economists who believe the next recession could happen as soon as 2020.

downward-slope“A recession fundamentally is an outbreak of pessimism” that causes consumers and businesses to slow down spending, economist Jesse Edgerton of JPMorgan Chase told USA Today, and typically there is some other factor – aside from rising interest rates, unemployment and inflation – needed to slide the economy downward enough for a full-blown recession, e.g. the oil prices in 1990, the dotcom bubble in 2001 and the housing market crash in 2007.

What would those factors be in 2020? Per the experts, higher inflation and asset prices, higher energy prices, an intensifying trade war and other issues overseas all could be the spark that lights the fire.

Since initial reports began surfacing in May and early June, more economists have piled on.

“Our calculations suggest that a major trade war would lead to a significant reduction in growth,” wrote Joseph Song and Stephen Juneau, U.S. economists at Bank of America Merrill Lynch. “A decline in confidence and supply chain disruptions could amplify the trade shock, leading to an outright recession.”

Our poll responses seem to suggest there is some merit to the economists’ claims, as more than two-thirds agree there will be another recession sometime in the next 1-5 years.

What can you do to prepare? Here are 9 steps to get your personal finances in order, and you can read more about preparing your clients here.

Make sure your voice is heard in our weekly polls! This week we want to know how you feel about the American Dream – has the definition changed in your lifetime? Cast your vote now!