Guggenheim: Prepare for Recession in 2020

Brian Smedley is Senior Managing Director and Head of Macroeconomic and Investment Research at Guggenheim Partners.

Brian joined Guggenheim in 2015 from Bank of America Merrill Lynch, where he was Director and Head of U.S. Short Rates Research. Prior to joining BAML in 2010, he spent nearly five years at the Federal Reserve Bank of New York. There he served as a senior trader in the Markets Group during the financial crisis and previously as a senior economic analyst in the Emerging Markets and International Affairs group.

Brian graduated summa cum laude with a B.S. in finance and economics from Utah State University and an MA in international development studies from the Elliot School of International Affairs at George Washington University.

I interviewed Brian last week.

Please discuss your role at Guggenheim and how you support the investment decisions that get made throughout the firm.

I head the Macroeconomic and Investment Research team at Guggenheim Investments. In that role I lead a team of macroeconomists and investment strategists. We work closely with our global chief investment officer, Scott Minerd, to provide the rest of the investment team with the outlook on the U.S. and global business cycle, market forecasts, and policy views that determine our positioning at a high level across portfolios.

In your recent commentary, you said that the U.S. economy is about two years away from the next recession. How severe will that recession be and what was your analysis behind the two-year timeframe?

Last year we developed a framework that brings together several indicators to give us an early warning sign as a recession is approaching. We started by studying the common characteristics of pre-recessionary periods historically. The narrative begins with an economy that is growing above its potential for a sustained period. We see evidence of that in the fact that the unemployment rate is declining. As it declines below full employment, the Fed grows concerned about an unsustainably tight labor market and what that may portend for rising inflation. The Fed raises interest rates and tightens monetary policy. As it does, we tend to see evidence that monetary policy is getting tighter in the flattening of the Treasury yield curve. We focus on the three-month/10-year Treasury curve.