Los Angeles

The risk of a recession in 2020 has fallen from previous reports. This month, UCLA Ziman Center for Real Estate published its latest economic analysis, reducing the risk of a recession from earlier predications. The new analysis comes as the result of several pressure points, like the trade disputes and housing starts, have improved.

"A lot of worries from September have gone away. There seems to be a temporary truce in trade; the new NAFTA, the USMCA, is passing; housing starts are better; and the stock market broke out, and there is a wealth effect coming from that that will help the consumer," David Shulman, senior economist for the Ziman Center and UCLA Anderson Forecast, tells GlobeSt.com. "The recession risks are now lower. If we want to put numbers on it, we would have predicted 45% in September, which is pretty high. Today, we are predicting a 30% chance of a recession, which is a big downgrade."

The Federal Reserve's activity has also played a role in reducing the risk of a recession next year. "The Fed's interest rate policy has helped a lot as well. There is a plumbing problem in the Treasury Repurchase market, and the Fed has been flooding the problem with reserves," says Shulman. "That has really loosened the financial conditions. It isn't so much the rate cut, which has helped, but it is Fed's response to the problems in the repo market that have really changed financial conditions. That is a bigger deal than the rate cut."