That's what Deutsche Bank reckon. But are they right?
I mentioned previously that I was planning on catching up on some investment-related reading over the Christmas break. And close to the top of the list was a study from Deutsche Bank that came out in early September: Long Term Asset Return Study: a Roadmap for the Grey Age.
The urgency was given added impetus by an e-mail in my in-box from Howard Archer, chief economist at IHS Global Insight. Commenting on Thursday's modest upwards revision of the GDP estimate for the third quarter of the year, Dr Archer said this:
"The economy is clearly now finding it very difficult to grow at all in the face of serious domestic and global headwinds... we expect economic activity to be essentially flat in the fourth quarter, and modest contraction in the early months of 2012, before the economy stabilizes and returns to gradual growth in the second half of 2012."
That's right: economic contraction in the first quarter of next year, 2012.
Now technically, of course, that might not officially count as a 'recession' -- for it to be an official recession, two (or more) quarters of economic contraction are required.
But irrespective of that, I suspect that it will feel like a recession.
And in any case, the fourth quarter of this year -- essentially flat, as Dr Archer puts it -- could turn out negative, too. In which case, it's an official recession, as well as a contraction that feels like one.
Back in early September, when Deutsche Bank published its report, the authors kicked off with an assertion that to me seemed somewhat unlikely at the time.
Namely, that we would see a recession in 2012 -- and an 'official' one, at that. That seems remarkably prescient, seeing that the document would have been penned in July and August.
What's more, the authors bluntly assert that we will see two more follow it: one in or around 2016, and another in or around 2020.
How come? It's part of a move to shorter business cycles, in short, a development that is driven by low demand, debt, and funding crises.
Indeed, while the authors make the point that business cycles over the next decade will be shorter than is historically normal over the 157 year period that they studied, they also point out that the longer-than-average periods of economic expansion seen post-war have been something of an anomaly.
"The full 157 year period has seen an average expansion of 39 months (30 median) and an average contraction of 17 months (14 median). Based on these averages the first recession of this decade could start somewhere between December of this year and August of next year (2012)," they write.
Subsequent recessions could occur between 2015‑2017, and then between 2019‑2021, they add, noting that "It's quite easy to construct an argument for three recessions in the next decade as we revert to normality."
What does this mean for investors?
This is serious -- and sobering -- stuff. And you don't have to be a genius to see that three recessions in the next decade could upset an awful lot of assumptions about stock market growth, retirement savings and wealth accumulation.
Or, as the Deutsche Bank authors put it:
"Overall, the next decade will likely be one where buy and hold will generally be a fairly poor option in developed markets. Identifying the turns in the business cycle will likely see the best chance of out‑performance. There will be large cyclical rallies punctuated by recessions and funding crises."
Oh dear. Interesting times, indeed.
But there is hope. It's a decade of shorter-than-usual business cycles as the global economy works off excessive debt and over-inflated asset prices.
After that, normality returns -- although a less affluent normality than that of the last few post-war decades.
Festive cheer? Sadly not. But certainly something to chew over. What do you think?
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