What is coming our way in 2019? A significant recession is very much in the cards. Important economic indicators are pointing in that direction. The most recent release of consumer confidence by the Conference Board showed that American households expect a weak first half of the year. The Conference Board index fell to 128.1 in December, down from 136.4 in November. The October index stood at 137.9, the highest since 2000.

Next week the University of Michigan will release its final results for December, which probably will mirror those of the Conference Board. The Christmas shopping season was undoubtedly good, but that may have been the last hurrah for the retail market for now. Now we have to look forward to weak performances. Not even the president’s urgings will turn that into a positive.

The University of Michigan preliminary consumer confidence report came in at 98.3 vs. an earlier report of 97.5. That is the same reading as reported for November. At that, the 2018 average came in at 98.4, which was the best performance since 2000. But now comes 2019 and that is expected to be much weaker.

In addition to the consumer statistics, housing data also point to a softer economy. Pending home sales, in November, were down 7.7% y/y vs. 6.7% the month before. This marks the eleventh consecutive month of declines in pending home sales and the steepest decline since April of 2014. The biggest fall was recorded in the West (-12.2 %), followed by the Midwest (-7%), South (-7.4%) and Northeast (-3.5%). Now we are entering the winter months, which normally are weak for home sales. The stock markets are also pointing toward a softer economy, supporting the less favorable consumer sentiment.

Domestic developments are unfavorable. International developments look quite unpleasant as well. First, there is Brexit, which remains unresolved and may never be concluded. Then, there is the possibility that Scotland will throw a wrench into the proceedings with a referendum that mandates  that Edinburg to secede from London. Scotland tried that before and the effort was quashed. This time around it might just succeed.

The rest of Europe is showing signs of economic softness, just as the ECB ends its QE efforts. That might mean that the ECB will reintroduce its QE actions, boosting the monthly liquidity injections to their original levels.

The Trump trade war has not yet started in earnest. There is a good chance that he will accelerate his tariff initiatives and make the global climate worse. So far he is mainly concerned about the Trump government shutdown, which has not yet shown what it is doing to the domestic economy. That will become apparent once the shutdown is over.

China has lowered tariffs on a wide range of goods. Now we will have to see what this will do to American imports from China. We will also have to see what the Trump reaction will be.