The U.S. economy is beginning to show signs that it’s ready to roll over into the next recession, according to David Stockman, the former budget director for President Ronald Reagan — and if you have money invested in the markets, you should consider taking it out.
“What you do is, you put it in cash and then you wait for the correction and then you buy low and ride the next cycle, because that’s the way the economy works,” Stockman said on Tuesday during an interview with FOX Business’ Stuart Varney.
Although the market is still in the midst of its longest bull-run yet, Stockman warned that, because of a tightening monetary policy by the Federal Reserve and an international trade war, the growth can’t last.
“This is what an economy looks like at the end of a business cycle when it’s about ready to roll over into the next recession,” he said. “That’s where I think we are right now. Not the rearview mirror, but looking ahead.”
Policymakers at the central bank have already voted to hike interest rates twice this year, and are expected to do so twice more in 2018, bringing the yearly total to four. Officials previously indicated that three rate hikes would come this year.
And during an interview with FOX Business, Dallas Federal Reserve President Robert Kaplan agreed that headwinds from a tit-for-tat tariff battle have cooled some businesses, as more companies are taking a wait-and-see approach because of uncertainty surrounding trade. But he said that hasn’t actually affected the overall economy yet, and would therefore not affect the number of interest-rate increases.
“I have no idea when [the recession will come], but I would say we’re in the final days when you look at the firestorm that’s coming down the road,” Stockman said. “The point is, you can have a bubble that extends for seven, eight or nine years and then they end in tears.”