I'm beginning to be convinced subprime auto loans may be a precursor to the next downward trend but perhaps not serious enough to be the cause of a recession.

www.bloomberg.com/news/articles/2017-03-10/u-s-subprime-auto-loan-losse…

Like the above poster I'm not sure if it will cause a recession but something I feel is worrisome may be pension underfunding

Trade war between China and the U.S. and Europe sounds like a good one.

Funny answer? Doesn't matter. We'll blame Donald Trump.

My answer? The most likely catalyst is a fixed income crash in the Eurozone.

Inflationary Trump trades. A recession doesn't have to be a crisis.

beanie babies 2.0

Can't believe no one has mentioned this yet - the student loan bubble

Loan book growth and loan quality of Chinese banks. Lending to riskier companies has slowed last year, but it's a house of cards hinging on the country's ability to continue growing at a high single digits rate. However, growth is in part driven by banks' increasing lending. Has some resemblance to the US housing bubble building up pre-2008. Caveat is that the Chinese government is fully aware and ready to intervene... S&P's take: "A banking crisis is likely to be avoided yet again in 2017, in light of another year of GDP growth exceeding 6pc, and a change in the credit mix to relieve asset quality. However, the current trajectory is not sustainable"

1 way to spot a dummy: wait for the 'student loan bubble' answer to this question.

Trump's failure to repeal Obama care. Relax for the next few years US is boom town.

ETF will be at the center of the next crash I think

I think the catalyst for the next recession would be if Trump and his republican cronies are unable to get anything done in 2017-2018. Markets currently are on an "animal spirits high" right now which I believe can be reversed instantly once they see that Trump is not what they thought he would be as President.

I'm concerned about the amount of corporate debt outstanding and inflationary moves sparked by Trump administration.

Self-imposed 20% border tax is the most likely catalyst given that top advisors aren't backing down regardless of economists estimates. The Trump administration is one that has nearly the fewest economists on staff in American history. I would look for a catalyst related to economic policy as a likely culprit.

Commercial Property Bust. We're seeing the initial onset with the big retailers like JCP and Sears selling off.

Years of an expanded Fed balance sheet translates into significant inflation as money that was 'sterilized' in the financial system begins flowing into the real economy.

I think this risk is particularly acute (although low probability for the near term) because anyone who said QE would translate into hyperinflation was laughed out of the room, and subsequently no one is thinking about this at all.

While this is not the "next recession", long term, I think that within a few decades, the answer will be "death".

We've got a generation on the precipice of retirement that's leveraged to the hilt and has got less than $10,000 in liquid assets saved up on average, with most of their wealth concentrated in a single asset, their house. Right behind them is an even more indebted generation - their children - and so on.

What happens when millions of highly indebted, cash-poor boomers go to the grave? Their debts fall on their already-indebted descendants.

Where do banks collect the money from when junior is already debt-overburdened in the first place?

To me, this has all the hallmarks of catastrophic recessions past:

(1) Lax credit issuance because credit originators might rely on old rules of thumb and past results in the place of actual due diligence ("who doesn't pay their mortgage?" -> "who leaves their debt to their kids?")

(2) Systemic risk:

-Like pre-2008, asset rating agencies are going to underestimate the correlation between default rates on the underlying assets on which securitized instruments are based ("Prices of homes underlying mortgages of a given vintage don't correlate across geographic lines" -> "an entire generation won't just stop paying off their credit card debt all at once")

-like pre-2008, the markets are going to underestimate the cascading effects of deterioration in the quality of credit being issued. In the same way that people failed to anticipate the effects that mark to market and declining CDO prices would have on the overnight repo market for entities like BS and LEH, people will fail to anticipate that it's not just granny who stops paying her loans when she dies, but her son too, as his debt burden just increased twofold. And he, unlike granny, is going to have the worse effect on the economy because he is at an age where we assume his consumer activity is the backbone of our GDP.

(3) The buck stops nowhere:

-On the lenders' side: like the banks that arguably acted in bad faith by taking the short position in a CDS that comprised a CDO they constructed prior to 08, the banks may arguably act in bad faith by issuing a five year loan to an old boomer with three years left on the clock. There's no incentive not to, as the bank is guaranteed a debtor whether the individual who took the original loan survives its term or not. Whose fault will it be when the borrower kicks the bucket before paying his debts? This is an argument that will more likely happen after the crash than before, as it did with Abacus and the like.

On the debtors' side: like those homeowners that took attractive teaser rates and prayed on that refi before 08, I think it's reasonable to argue you're going to see consumers who have been conditioned to live off borrowed money their entire lives taking on more debt right up until they die and not really caring about the feasibility of paying it back. What does it matter to them? They'll be dead, anyway. And like the unsophisticated borrowers of pre-08 who didn't understand a variable rate mortgage, do you think the borrowers of the future are going to be thinking about debt-inheritance laws when they're trying to decide whether to borrow money for their new home/elder care/etc.?

As is always the case, rising interest rates.

Increased demand for CLOs. Lots of "secured" cov-lite deals getting done that shouldn't

Student loans

This post is way too US centric. People seem to forget that other parts of the world can also f**k things up LOL

My bet is on the collapse of EU or burst of property bubble in China.

Don't think the next calamity is going to be able to isolated like '08 or '00 was. It's not going to be something like housing or tech stocks.

It's going to be a repricing of sovereign debt/risk as a whole. I personally don't think people realize how distorted capital markets are. Not just referring to QE and ZIRP, talking about the credit binge that the world has been on since the 70's. We've essentially completed an LBO of the entire world, now the bills are about to come due.

Don't think it's worth talking about whether it will be CDO's or CLO's or whatever derivative you want to talk about.

Governments unable to borrow short term to fund their long term liabilities...That's the crisis that we need to worry about.

Also. If anyone wonders where all of the hidden inflation is from QE, spoiler alert: asset price inflation is still inflation.

The next catalyst for our recession will be when all these immigrants take our jobs!

Sure, Susan with your high school degree, Muhammad the neurologist did take your job!

Macro-economically treating "growth in technology, entrepreneurship, etc." as an exogenous variable in determining growth in GDP. I think this is largely the reasoning behind not being able to indicate bubbles/inflation in the past half a century. Further, while student loan debt is ridiculous and it can be argued that the return of a **bachelor's* degree is difficult to measure. The income inequality that tons of Americans set themselves up for is a real problem. To treat a variable that is 50% of the current contribution to the GDP growth formula as exogenous, is in my opinion, to overstate it a ton. Combine that with QE and you have a pretty solid facade, but the chickens will come home to roost. I heard an interesting thing the other day... Robinhood, a trading app saw some ridiculous account opening numbers and trading volume around Snap's IPO. When I think about the kind of person to open a Robinhood account, I think of the kid who majors in polisci, rips a vape pen, gets married at 24 and works in "marketing and sales" for a startup social media advertising company. "Growth in technology" calculated in GDP technically treats this guy the same as someone who actually contributes to production. That's the next recession.

Auto Lending is a catastrophe waiting to happen ..

https://goo.gl/tk5lIG

But the next recession ? No chance, auto loans are much, much, smaller than mortgages, far shorter terms &, unlike a house, nobody buys a car expecting it to go up in value. Auto loan default risk is very manageable for investors.

The next "major" recession in my opinion, will come from a boom in automating jobs - particularly in industries that are highly employable (like driving, couriers, taxi's ect...), and an unequal distribution of the wealth it generates.

i) Companies getting richer as a result of lower overhead costs & staff ii) Unemployment rates skyrocket and the government is unable to subsidize

I think auto loans are a large problem, but I doubt a collapse in the auto loan market will cause a recession. Student loans also ring some alarms because the amount of debt a given student may start with anecdotally seems to be greatest in fields with the lowest propensity to actually pay them back, ie; Student A seems much more willing to take on $75k in debt for a degree with a starting salary around $30k/yr than Student B is to take on $30k in debt for a degree with a $70k/yr starting salary. This inconsistency seems troubling in my opinion.

It likely will not be an isolated incident, but a combination of tumultuous domestic lending conditions and more global instability issues.

I haven't read through all of the comments thoroughly but I am assuming that this has not been mentioned. As of recently central banks have been investing into the stock market. I am no expert in macroeconomics as a whole but I believe that the idea of central governments pouring money into the stock markets could dramatically hurt the global economic scene.

A wave of global protectionism begun by USA, runaway inflation, and the bursting of the college loan bubble.

Also I have heard the auto loans thing and don't think it is anywhere near big enough to be systemic. That said if there is a recession, those subprime auto loans will probably be the first thing to go. That and shopping malls. It's important though not to get the cart before the horse with these kinds of things.

Sovereign. Debt. Crisis. #inflationiscoming

I think the spark will be lit by something either China related, or more frighteningly, technology related in the form of creative destruction.

Simple - Trump impeachment or equivalent. Market will turn into a death spiral.

Recession? Easy....textbook credit cycle. Everyone here seems to be looking for the next 2008. Ain't gonna happen!

populism

I agree with most people above. I'd like to add a couple of other catalyst that has not been mentioned above.

First is cyber security meltdown. I am concerned about strength of current cyber security. More and more companies' client data are breached. All of our computers are probably already hacked and our identifty information already sold on black market maybe to these marketing companies. We live in a world where gigantic amount of data moving everywhere quicker than ever. However, I don't think digital security is catching up to that. What concerns me is that there can be a global meltdown on cyber security where our cyber transactions are collapsed, making online banking insecure. When this happens, will hacker group-who probably already knows our id/pw for our banks-try to freeze our computer and pull our money out of our bank account? If such global meltdown happens, this could wreck havock on global financial system.

Second is dollar's fall as a world key currency. One major reason dollar being world key currency was because it was tied to middle eastern oil. As world transitions and becomes powered by renewable energy, I don't know how that will affect dollar's status as a world key currency. With main advantage over other currency taken off, I think there can be a currency war between currencies of other countries. I think this also can be a big factor.

Third is China's Great Fall. This can be long so I won't provide my reasoning. However, China has avoided structural reform on their economy. Their financial system seem, to me, in the verge of collapse. If China fall, I think it's going to be in a global-scale affecting global economy.

Small recession caused through China slowdown/S&P Crash -> Central Banks will literally have no instruments left, interest rates already at 0 -> Stock Market Crash -> all the QE money that went into capital markets over the last years flows into the real economy -> Hyperinflation

Lets see. North Korea tensions, Trump's delaying of agenda, record consumer debt levels, weak producer data, record withdraw from domestic funds, massive global ransom hacking, new ebola outbreak, absolute chaos in Venezuela.

2-3 years ago, just one of those catalysts would've called for a ~5% pullback. yet we're trading at all time highs.

it'll take a true black swan event, something outside our economic/political sphere.