* By Jason Schenker *
2018 was a big year and optimism from 2018 carried over into the start of 2019. Then tax cut tailwinds faded against a larger-than-expected trade war between the United States and China. And 2019 weakened. These dynamics of disappointment were most pronounced for the global economy. But weakness in U.S. business investment and U.S. manufacturing played out in 2019 as well. The salience of this weakness casts a long shadow on the year ahead.
U.S. outlook in 2020
Looking ahead at 2020, various financial markets have been vacillating as they are alternatingly influenced by the specter of recession against the backdrop of one of the strongest job markets in U.S. history. But there is more to play out in the year ahead than just the tug of war between U.S. consumption, which is 70% of GDP, and U.S. business investment, which is 15 to 20% of GDP.
The prospects for a tumultuous 2020 political season in the run up to the U.S. presidential election along with potential impeachment could add volatility, uncertainty and adversely impact business investment decisions. Furthermore, the broader global geopolitical landscape has shifted rapidly. And the antagonisms between the U.S. and China are likely to intensify, even if headlines tease prospects of detente. Furthermore, the heretofore fraying edges of diplomacy between the two largest economies on earth is likely to have negative implications for corporate profits and Herculean implications for some supply chains—especially for higher technology industries.
The term “frenemies” is a term that Millennials are typically more likely to invoke than Boomers. But the truth is that a permutation of this phrase was coined in the 1950s about the Cold War between the U.S. and the USSR.