Neil Irwin, senior economic correspondent with the New York Times, recently published an article in the paper about what, if any, might be the three most likely things that could possibly start a recession in the US.

(I know, it’s both difficult and a little frightening to consider a recession with the stock market continuing to rise and the GDP increasing by 4.1% in Q2 2018.   But, we are most definitely seeing shifts in the real estate market that may point to a recession…and… ur current economic expansion celebrates its ninth birthday next month. Nothing lasts forever.)

Irwin believes that no one thing but rather a combination of three things will turn the tide on our economy. Irwin points to the Federal Reserve, the country’s debt market and a current trade war policy as those three things.

Irwin’s view on the Fed is that the Federal Reserve has had an “easy time of it” during these last couple of years. The country’s inflation and employment rates have been gradually moving towards “healthy” levels and the Fed has gradually raised rates accordingly.

Now, however, the Fed’s job is becoming more “risky.” Inflation is already at +2% and the country is nearing full employment. The Fed, according to Krishna Guha, head of global policy and central bank strategy with Evercore ISI, may “have to” raise rates more aggressively to keep inflation in check. Simultaneously, while the Fed may raise rates to slow the economy, the tax policy that is currently fueling the economy will slow down the economy a lot by 2020.

Can the Fed “thread the needle” on interest rates without overheating the economy in 2019 and help preventing a downturn in 2020-2022 when the tax policy boost automatically slows down? This “threading” is a very “tricky thing”, according to Irwin.

Ben Bernanke, former head of the Fed, said in June 2018 that the stimulating benefit of the tax cut was going to “hit the economy in a big way this year and next. And then in 2020, when that benefit dries up, Wile E. Coyote is going to go off the cliff.”

The country’s debt market is Irwin’s second variable. Due to low interests rates, corporations have loaded up on debt for the last decade. According to the McKinsey Global Institute, the debt market has risen from 16% to 25% of the nation’s GDP. The rise in overseas debt loads is even greater as lenders in emerging markets have shifted to more risky borrowers.

The question regarding debt markets becomes…if inflation gets out of control and the Fed sharply raises its rates to “deal with that inflation,” can corporations and businesses and individuals handle their debt if and when that debt costs more?

Third, a looming trade war does not bode well for the economy. Currently, exports represent only 8% of total GDP in a $20T US economy. Any already announced tariffs would “amount to roughly half a percent less in GDP,” but, “Trump’s threats could prompt a much broader crisis of confidence and lead corporations to hold back from capital investment because of uncertainty over future trade policy.”

Moody’s Analytics indicates that a trade war could cause a global economic slowdown, market sell-off, job losses and “…an evaporation of business confidence.” Moody’s sees the likelihood of a “trade conflagration” causing a late 2019 recession.

Irwin concluded his article by saying, “The seeds of the next downturn have almost certainly already been planted. The question is which of them (the Federal Reserve’s policy on inflation and interest rates, the debt market, trade war policies) will grow into a problem big enough to matter.”