reached the low point in the current business cycle, up from
just 15% one year ago.
The drop in sentiment occurred in Q1 2019 and continued
in Q2 2019, and is likely a reaction to a confluence of
developments over the past several months that have
destabilized economic activity. These include:- A sharp stock market correction at the end of 2017;
- The 35-day partial shutdown of the US Federal
Government; - Seemingly endless back-and-forth volleys in what has
become an escalation and expansion of tensions between
the US and several of its largest trading partners,
including China, Europe, Canada and Mexico; - Hostilities towards Iran, Venezuela and most recently
Turkey; and - The mess that is Brexit which continues to fuel uncertainty
on both sides of the Channel with the two leading
candidates to replace UK Prime Minister Theresa May
both vowing to pursue divorce from Europe at almost any
cost, including a ‘hard Brexit’.
The latest forecasts of 2019 GDP growth in the US and
Europe have been scaled back. As of its early July forecast
update, The Economist’s poll of forecasters reset US GDP
growth to 2.2% in 2019, while Germany’s economy is
expected to expand at just 0.8%, with France (at 1.2%) and
the UK (at 1.3%) not faring much better.
US after-tax corporate profits closed out 2018 above $2tn
on an annualized basis, an unprecedented level that
continues into 2019 based on the latest information from the
US Bureau of Economic Analysis. Generally speaking,
companies are continuing to allocate a significant proportion
of these proceeds to share buybacks and dividends, which is
fueling stock prices.
The lofty trajectories of bellwether US stock market
indices, including the Dow Jones Industrial Average and S&P
500, apparent favorite metrics of US President DonaldTrump, are bright on the radar as investors weigh these
positive indicators against other developments, including
slowdowns in international trade and investment, and an
inverted yield curve in the US Treasuries.
Historically, yield curve inversions, where the interest rates
offered for short-term bonds are higher than for the
benchmark 30-year US Treasury bond that matures in 30
years, have preceded the last seven US economic recessions,
including the most recent four recessions in 2007-2008,
2001, 1991 and 1981-1982.What Does This Have to do With BizAv?
Investment, trade, and travel decisions are tightly linked with
the sentiment of business leaders, high net worth individuals
and their families – many of whom remember only too well
the horrors of the 2008 worldwide financial crisis and its
immediate and longer-term aftershocks.
The risk of a US recession is now on an increase, ironically
just as the nation’s economy extends its record-length
expansion. A June 7-12, 2019 poll of economists published
by Bloomberg suggested that the risk of a US economic
recession in the next 12 months has risen from 25% to 30%.
Excluding the 12% who were uncertain, fully 18% of
respondents to JETNET iQ’s Q2 2019 Survey of business
aircraft owners and/or operators in 59 countries ‘strongly’
agreed with the statement: “I believe that there is an
increasing risk of a global economic slowdown in the next 12
months”, while a further 47% were ‘somewhat’ in agreement.
Naysayers might be quick to point out that simply talking
about the possibility (let alone the probability) of a recession
does little but encourage its eventual onset.
While there may be some dark logic to that approach, our
view is that business aircraft buyers and sellers are already
factoring in the potential for changes in the market,
especially with exogenous factors like Brexit and another
highly contentious US Presidential election already in play.
MI http://www.navigating360.comAVBUYER .comhttp://www.AVBUYER.com^ AVBUYERMAGAZINEVol^23 Issue^8 2019 ^19
With 35+ years in the aviation industry, Rolland Vincent,
president, Rolland Vincent Associates (RVA) has served as a
trusted consultant at Textron, Bombardier and ICAO in various
roles in strategy, marketing, business development, aviation
economics and aviation statistics. Identifying a need for
enhanced insights into the state of the business aviation
marketplace, Rolland Vincent Associates partnered with
JETNET in 2010 to create JETNET iQ. Mr Vincent is chair of the
Transportation Research Board’s Standing Committee on Light
Commercial and General Aviation, and is president, RVA,
a consultancy focused on aviation market research, strategy,
and forecasting. Contact him via [email protected]MarketIndicators Aug19.qxp_Layout 1 16/07/2019 15:34 Page 2