May 2, 2018
The U.S. economy entered its second-longest expansion since 1785. The expansion from 1961 through 1969 was, until May 1st, the second longest in U.S. history, and the only other expansion that has been longer was one that spanned the decade from 1991 to 2001. The current trend will need to continue through July 1, 2019 to officially be the longest economic expansion cycle on record.
Long expansions are not the historical norm, points out Cushman & Wakefield researcher Revathi Greenwood. “Through World War II, the odds were fairly even that in any given year, the U.S. would be in a recession,” Greenwood said. “Since then, though, recessions have become less frequent. While context matters for why some expansions last longer than others; one thing is clear: they don’t die of old age.”
The yield curve has been compressing recently, as short-term interest rates have risen faster than long-term rates, notes Cushman & Wakefield in its new “Economic Cycle” report co-authored by Rebecca Rockey. She predicts it has the potential to compress further or to sit comfortably as-is for some time. Other leading indicators, including confidence, the labor market, and manufacturing orders, remain strong, she says.
However, Greenwood says, “there’s little reason to think that the end of the expansion is in sight. Tailwinds from the fiscal stimulus and the revival of emerging markets as a global growth engine bode well for the economy in the near term, and recent stock price volatility is probably telling us a lot more about investors’ reactions to earnings reports and their appetites for unpredictable policies, than anything about the business cycle. Popular leading indicators are not flashing red – it’s more like light orange.”
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