Fortune - USA (2019-12)

16

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.