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Magic 8 Ball Economic Predictions for 2020

By February 10, 2020 No Comments

My daughter recently was given a Magic 8 Ball, touting the claim that it has all the answers to your deepest questions. When thinking about predictions for 2020, I thought who best to ask than the Magic Eight Ball.

Question to Magic 8 Ball

Will we have a recession in 2020?

If I had asked the Magic 8 Ball this question about a recession for 2018 or for 2019 the response would have most likely been Signs point to yes, as fears of a recession loomed large. For 2020, economic indicators are positive;

  • Unemployment rates are at their lowest levels since 1969 at 3.5%.
  • Stock Market had a record setting year in 2019.
  • GDP Growth in 2019 was 2.1%.

 

Predictions are that while growth may be slow, the threat of a recession is not imminent.

Magic 8 Ball Answer

My sources say no.

 

Question to Magic 8 Ball

Will interest rates rise in 2020?

After several years of increased interest rates, 2019 saw the Fed cut rates three times. The cut was in response to trade uncertainty and slower growth in global markets. The prediction for 2020 is that interest rates will remain stable. And with the economy predicted to experience stable or lower growth in 2020, I see no reason for the Fed to raise interest rates.

Magic 8 Ball Answer

Don’t count on it.

 

Question to Magic 8 Ball

Will the auto market pick up in 2020?

Auto loan growth has been slowing over the past several years. The National Automobile Dealers Association (NADA) forecasts sales in 2020 will be approximately 16.8 million units, a 1.2% drop from 2019. Despite slower growth, the average loan amount for new and used cars is at record highs. This has pushed loan terms to an average of 69 months for new cars. Depreciation is on the rise as well. A steep decline in auto values in Q4 ‘19 pushed the overall depreciation in 2019 to 16.8%.

Higher depreciation with longer terms results in higher negative equity. So while the auto market still presents opportunities for growth, collateral risk will need to be closely monitored.

Magic 8 Ball Answer

Outlook not so good.

 

Question to Magic 8 Ball

Will housing prices go up in 2020?

There is no sector in the economy that is more dependent on geography than the Real Estate Market, but the Magic 8 Ball can’t answer “Depends on where you live.”

In this stable economy and low interest rate environment, you would expect predictions for 2020 to be Outlook Good but a scarcity in housing stock may put a damper on growth for 2020. Like other trends we are seeing, the Real Estate Market for 2020 is predicted by Zillow to be stable with some growth likely.

Magic 8 Ball Answer

Reply hazy, try again.

 

Question to Magic 8 Ball

Will unforeseen events affect the economy?

There may be unforeseen wildcards that impact the economy. We know there will be a 2020 election and the outcome will have an impact, specifically;

  • Will the trade war continue?
  • Will economic policies continue to favor deregulation?
  • Will the tax code change?

Whether it be interest rates, unemployment, collateral markets or other economic factors, unpredictability has become the norm. While the magnitude of the impacts are hard to quantify, the economy is constantly affected by unforeseen events ranging from political events or industry disruption to environmental factors or natural disasters.

Magic 8 Ball Answer

It is decidedly so.

Dinny Lechman

Twenty Twenty Analytics

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