Good morning.
Will a recession hit in 2019? Sorry to start the New Year on a downer, but there are more than enough reasons to think it will — a sinking stock market, a flattening yield curve, declining profits, waning fiscal and monetary stimulus, a slowing Chinese economy, a trade war, etc… As we reported shortly before Christmas, the majority of economists still think we’ll avoid a downturn this year and more likely face one in 2020. Typical is this new report from Goldman Sachs, shaving its growth prediction for 2019 to 2% from 2.4%. But if there is one thing we know for certain, it is this: economists have a uniformly lousy record of predicting recessions. That’s because recessions are usually precipitated by the unpredictable. In any event, I’m more inclined to agree with the Term Sheet readers who responded to Polina Marinova’s survey on the 2019 outlook.
But that pessimism is for the short term only. The most far-sighted business leaders I talk with these days are preparing for an explosion of new business possibilities from the application of data-and-machine-learning-powered technologies, that will goose economic growth for the next decade and more. If a recession hits, it may only be an opportunity for the haves — those businesses who have begun preparing aggressively for the revolution — to widen their lead over the haven’ts.
At Fortune, we’ll spend the year shining a spotlight on these technologies and staffing up to improve that coverage. We’ll also continue to convene communities of business leaders to give them opportunities for sharing best practices. You can find the full rundown of our 2019 events here, but let me highlight a couple of new ones: Brainstorm Finance, focusing on the technological revolution that’s upending the finance world, will be held for the first time June 19-20 in Montauk, N.Y. And the Fortune Global Sustainability Forum will be held September 4-6 at the indescribably beautiful Fuxian Lake in Yunnan Province, China. These are invite-only events, but we make extra effort to accommodate CEO Daily readers, so let me know if you are interested.
More news below.
| Alan Murray | |
| @alansmurray | |
| alan.murray@fortune.com |
Top News
Bad Start
After their worst performance in a decade last year, Chinese markets began 2019 on another bleak note. A report about contraction in Chinese manufacturing led to significant falls in the Shanghai Composite (1.2%) and Hang Seng (2.8%). Stock markets in Australia and South Korea fell by 1.6% and 1.7% respectively. Europe's Stoxx 600 index reflected a 1.6% fall at the start of the day. U.S. futures are in the same ballpark. Bloomberg
Shutdown Talks
President Trump has invited Democrats to meet with him at the White House today, to discuss a possible deal over the continuing partial government shutdown. The Democrats, who take over the House tomorrow, have come up with a proposal that would end the shutdown without bowing to Trump's demand for wall funding. Trump doesn't like that, so it doesn't seem that either side is willing to give ground. The Hill
Saudi Netflix
Netflix took down in Saudi Arabia an episode of comedian Hasan Minhaj's satirical show, in which he mocked the Saudi government for its evolving attempts to explain the disappearance of journalist Jamal Khashoggi last year. The move took place following a request from the Saudi government—Netflix says it was just complying with the law there, but human rights activists are outraged. Guardian
Bolsonaro Inauguration
Jair Bolsonaro has been inaugurated as Brazil's new president. The hard-right leader, who has expressed admiration for the country's former military dictatorship, swore to adhere to democratic norms while effecting "Brazil’s liberation from socialism, political correctness and a bloated state." Bolsonaro is likely to embark on a massive privatization drive, in order to improve government finances. Reuters
Around the Water Cooler
Romney on Trump
Incoming senator and former presidential hopeful Mitt Romney has attacked Trump in a Washington Post op-ed that says "the president has not risen to the mantle of the office." Romney is fine with Trump's tax reforms, Chinese trade war and appointment of conservative judges, but not so much with his treatment of allies, nor his general character. WaPo
Chinese Property
The Chinese government is keen to slow the pace of property development in its cities, in order to make prices more realistic and to boost investment in industry instead of real estate. Commentary in state media: "All areas should focus on their own urbanisation processes, develop their own pillar industries according to population mobility and resources, and form new points of growth to avoid the old road of relying on real estate to drive the economy." Reuters
Brexit Pressure
A whopping 72% of supporters of the U.K.'s opposition Labour Party want its leader, Jeremy Corbyn, to fully support a second referendum on the country's withdrawal from the EU. Corbyn has so far expressed no keenness for any "People's Vote" that could stop Brexit—he is widely believed to believe that membership of the EU would hamper socialist reforms should Labour come to power again. Evening Standard
Air Unfare
Cathay Pacific accidentally sold first-class and business-class seats for $675 when they should have cost more like $16,000. The carrier pulled the fares, from Vietnam to New York, after travel bloggers flagged them up. However, it said it will honor those it already sold. BBC
This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.
