I’m going to make predictions about 2020—a fool’s errand for sure. But this fool’s guess is probably just as valid as anyone else’s—I do follow economic trends. Being diligent readers, you will save this article and pull it out on January 1, 2021 to see if I was right. It will be fun.


No one can predict the future. At best, predictions are just a guess. If anyone could truly predict the future, they wouldn’t be talking to us about it. Yet we see predictions all the time (usually described as “forecasts”). If the forecasts are right, the forecasters are considered wise geniuses and will be followed until their next predictions which usually will be wrong. Anyone who gets it right is just lucky.

I’m going to make predictions about 2020—a fool’s errand for sure. But this fool’s guess is probably just as valid as anyone else’s—I do follow economic trends. Being diligent readers, you will save this article and pull it out on January 1, 2021 to see if I was right. It will be fun.

Here goes:

The Economy

A lot of folks on Wall Street are “forecasting” a recession that will commence sometime this year. I am not. This fool’s “forecast” is that the economy will continue to bump along at a sluggish pace this year (GDP below 2% by year end). My reasoning is that the Fed is furiously pumping up the money supply (call it QE5). In the past three months, they have injected almost an additional half trillion dollars into the economy. New money has to go somewhere (stocks, real estate, debt, buybacks, mergers & acquisitions). Banks have plenty of reserves to make loans. The yield curve, that supposed harbinger of recession, is well into positive territory. And, it looks like Trump’s idiotic trade war is coming to an end, thus helping businesses and consumers with lower cost goods and less uncertainty. Employment levels are at an all-time high and the labor participation rate is climbing. People have jobs and personal income is rising. What could go wrong?

There is a lot of sand in the economy’s gears though. Corporate profits are actually declining. As well, the requirements for future growth are declining: population growth, capital investment, and industrial production. Debt is rising around the world (now, $244 trillion worldwide per the IMF). I wonder what would be the consequences should interest rates rise. Mr. Trump thinks negative interest rates would be a great idea, which it would if you discount the destruction of capital that it causes.

One may ask: why is the economy rather sluggish? Ignore the stock market for the moment. We are now and have been heading japanese. By this I mean that massive deficit spending by the government, high government debt relative to GDP, money printing, artificially low interest rates, and declining population growth are roadblocks to future growth. This is something sluggish Japan has been facing for several decades now and they have serious structural economic and social issues as a result. Et tu America?

The Stock Market

Here is something that I got from Grant’s Interest Rate Observer: two of the biggest investment powerhouses in the world give their take on 2020:

Bank of America: “We enter the next decade with interest rates at 5,000-year lows, the largest asset bubble in history, a planet that is heating up, and a deflationary profile of debt, disruption, and demographics.”

Goldman Sachs: “Overall, the changes underlying the Great Moderation appear intact, and we see the economy as structurally less recession-prone today…While new risks could emerge, none of the main sources of recent recessions — oil shocks, inflationary overheating, and financial imbalances — seem too concerning for now. As a result, the prospects for a soft landing look better than widely thought.”

If this advice from these experts fails to give you any comfort, understand that they are guessing, just like the rest of us.

My guess is that the Fed’s money pump and their promise to keep interest rates low will continue to push stock prices up. Nothing seems to faze this market, even with declining corporate profits. It will end, just not soon.

Real estate/Housing

Housing prices will continue to rise. On a national basis housing supply is low relative to demand, largely driven by low mortgage rates and municipal restrictions on new construction. New home sales were up about 17% in 2019, an up-trend that should continue. Housing starts are up too, about 14% over 2019. Home prices were up 3.7% last year and are predicted (by CoreLogic/Case-Shiller) to increase another 5% this year. Mortgage rates are low, about 3.8% for a 30 year loan. I’ll stick with that.

Commercial real estate grew by 2.5% in 2019. That trend will continue in 2020 for much the same reasons as will stocks: Fed interest rate policy and money supply pumping. As I said, money has to go somewhere. With a disastrous interest rate policy keeping rates artificially low, investors and savers search for better yields and they are willing to take on more risk to achieve better returns (“yield chasing”). I think the real estate market will get through 2020 O.K.

The President

As many readers know, I am not a big fan of President Trump. He has done three things that I liked: lower corporate taxes; excellent Supreme Court appointments; and chipping away at Leviathan’s morass of obstructive regulations. What I don’t like about him won’t fit into this article, but I’ll start with this: his disastrous trade policy; his economically harmful and immoral immigration policy; his profligate deficit spending burdening many future generations with our debt; and the chaos of his administration.

That said, he won’t be convicted by the Senate and he will win re-election.

It is pretty clear that a Republican Senate won’t convict a Republican president. No, it isn’t fair, but it’s politics. I do think trying to coerce the Ukraine president to harass a political opponent should be enough to convict him, but it’s fuzzy territory and so far nothing seems bad enough to turn the stomachs of Senate Republicans.

Trump has a high disapproval rating. The elites, especially liberal Democrats, hate him. But they fail to understand his appeal to “ordinary” Americans. His zany and often unhinged behavior tells us that he’s not just another politician: he’s genuine, unpackaged, raw, and off the cuff. He’s also a lot of bad things, mainly his megalomania and apparent ignorance. But he still draws huge crowds at his rallies. For some insight see this article in the Wall Street Journal (paywall).

Incumbency is a powerful force. With unemployment low, rising wages, and a booming stock market, he will be hard to beat. No extremist Democrat is capable of beating him and that’s all they have in this year’s crop of candidates. Maybe Bernie’s socialism would have gotten more traction in a recession year, but that isn’t the case today.

Things will change in 2020 and perhaps make my forecasts entirely wrong. Eventually the economy will stumble. I just don’t think it will be in 2020. But at least I am humble enough to tell you that I’m guessing.