This episode explores the potential for a US recession and the escalating trade war between the US and China. Against the backdrop of a volatile stock market and uncertainty surrounding tariffs, the panelists discuss the likelihood of a recession, with one panelist assigning a 50/50 probability. More significantly, the conversation pivots to the "Perkins Rule," which posits that a decline in employment, rather than GDP contraction, is the key indicator of a recession. The panelists debate who will concede first in the trade war, considering the political implications and economic vulnerabilities of both nations. For instance, the discussion highlights the potential for the US to blink first due to market pressures, while China's greater fiscal capacity allows for a longer game. Ultimately, the panelists predict a shift away from US economic dominance and the dollar's role in the global financial system, potentially leading to a multi-year transition and lower average returns for US equities. This means for investors a need to adapt to a new market regime characterized by lower US valuations and increased risk.
