THE OPTIMISM IS BEAMING like the summer sun. America’s big-company CEOs are bursting with confidence, in June expecting to take in even more revenue and make bigger investments than they foresaw in March, when they were more confident than ever before in the 15 years the Business Roundtable has been surveying them. CFOs are just as ebullient. Their perception of the North American economy was recently the highest in the eight years Deloitte had been asking about it. Leaders of small businesses also are brimming with optimism—more than at any time in the past 30 years, reports the National Federation of Independent Business. At least figuratively, confetti is flying, disco balls are spinning, and Champagne corks are popping across the length and breadth of American business.
It seems a shame to pull the plug on the dance music, so we won’t, exactly. As of mid-July, forecasters were expecting the announcement of a knockout GDP growth number for the second quarter, and it wouldn’t be surprising if the U.S. economy continued to grow impressively for at least a few quarters more. Unemployment is near historic lows, and better job prospects are drawing more workers back into the labor force. No wonder business leaders are confident.
Yet all these signs of economic strength mask fundamental realities that won’t fade away and mustn’t be ignored. The current economic expansion is much nearer its end than its beginning, as accumulating hints suggest—including the stagnating stock market, about which we’ll say more in a bit. Already the concerns are pushing up long-term interest rates, which is bad for asset values. Uncertainty about the effects of a trade war is causing many companies to postpone action, dampening potential investment. Indeed, look past those disco balls and you’ll see economic warning signs everywhere. A significant slowdown or even recession is coming sooner or later, and it’s probably coming sooner than you think. It always does.