Industry insiders debate when the market expansion will finally come to an end
Trying to time the next recession is like gambling at the roulette table, according to a capital market trader.
We are currently in the longest bull market in history as the expansion that began in the wake of the 2008 financial crisis rumbles on, despite constant warnings from analysts that we are nearing the end of the cycle.
Others prefer to look at economic fundamentals and Brian D’Costa, founding partner at Algonquin Capital, counts himself among them.
The fixed-income specialist stressed there is no time limit on an expansion and pretending otherwise is like trying to beat the house in Las Vegas.
“It’s like you’re at a casino, you’re at the roulette table and it could land on black five times in a row. The odds on it landing on black or red the sixth time is still 50/50. You know what? The odds don’t change because of the past.
“I’m in the camp that it really doesn’t matter how long we’ve been in an expansion. What really matters are the fundamentals and if there are imbalances or excesses in the system. Is there too much leverage? Is the monetary policy and fiscal stimulus restrictive? These are the things that matter in terms of whether an expansion will continue or not. The number of days we’ve been in the expansion is, in my mind, of very little importance.”
Sean Coakley, market strategist at Cambridge Global Payments, is more in the prediction and forecasting business and believes a recession isn’t immediately imminent.
However, he said: “Realistically from now to the middle of 2019, I think there is a good chance we could see one in Canada should current trends prevail. In the United States, there are predictions of a recession in the latter half of 2019 and into 2020.
“Guggenheim Partners actually went out and said we expect one, which is a pretty brave call. But if you look at the economic consensus, it says a US recession in 2020 is likely. If that were to come to pass, I think Canada would be in recession before the US.”
