Fortune - USA (2019-12)

(Antfer) #1

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FORTUNE.COM // DECEMBER 2019


Fortune
Crystal Ball


THE NEXT RECESSION


WON’T BE AS BAD


We’re now in the lon-
gest expansion in Ameri-
can history. But all good
things must come to an
end, and after the Great
Recession, you might be
bracing for catastrophe.
Stanford economist
Matthew Jackson has
even floated the Forest
Fire theory: that long
expansions produce lots
of marginally productive
“deadwood” relationships
that go up in flames when
a recession hits, making
the downturn worse.
But a recent study from
the Cleveland Fed found
no historical evidence
that long expansions
produce deep recessions.
So—barring another
unpredictable shock—
there’s no reason to think
the next recession will be
as bad as the last one.

WEALTH MANAGEMENT
CANNOT SAVE THE BANKS
2019 will go down as
the year of the layoff in the
banking sector. More than
50,000 of them. Deutsche
Bank, HSBC, Banco
Santander—recognize
something? They’re
mostly European—all

announced sweeping job
cuts this year as negative
interest rates, stalled
economic growth, and
competition from the
fintechs all bit into the
business. To jump-start
revenues and profits, the

big retail banks insti-
tuted a turnaround plan
that involves upselling
clients on insurance and
investment products
and wealth management
services, all of which carry
fat fees. Can this pad their
bottom lines and halt
the downsizing in 2020?
Don’t bank on it.

CENTRAL BANKS PUSH
FOR GREENER BUSINESS
Financing fossil-fuel
projects is about to get a
lot harder—largely due to
central banks. Many of the

The Economy,

Markets & Business
Brace yourselves. Turbulence is coming to the
world economy, but don’t expect a 2008 redux.

world’s best-known banks
have already spoken out,
warning that climate
change is a risk to finan-
cial stability. Commercial
banks will be forced to
follow their lead, resulting
in tighter financing and
more requirements for
companies to disclose
their exposure
to climate change.

NEGATIVE INTEREST
RATES GO MAINSTREAM
There’s nothing more
bizarro in economics than
the emergence of nega-

$


Barrel price of oil at end of 2020:
2020 will bring yet more oil, from Texas
to offshore rigs in Norway—but the world sim-
ply won’t need it. As economic growth slows,
so, too, will demand for oil—and any geopoliti-
cal shocks will cause only temporary spikes.

3,


S&P 500 at the end of 2020:
It’ll be a tug-of-war 2020 for U.S.
stocks. Lackluster earnings growth will restrain
share prices, while low interest rates and
promises from a reelection-seeking President
offer the occasional upward shove.
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