The US economy is clearly slowing down and I believe a recession is inevitable. Wall Street economists have increased the odds of a recession occurring over the next 12 months to 36.3%, which means, as a group, they still think a near-term economic contraction is unlikely. I concede that these economists are better educated and more experienced than I am, so I have to question myself. What could make me more prophetic than the pros?

I take comfort in the fact that economists have never correctly predicted a recession. Here is data going back to 1973:

Source: Merrill Lynch

Their poor track record of forecasting recessions can be explained by the rarity of recessions. An economist has been right more often than not when he forecasts 2-3% expansion which has been the long-term growth rate of the US economy. When he forecasts a recession, the odds are against him being right. So he will stick with the safe bet.

Even when he sees strong indications of a forthcoming contraction, if his peers fail to express the same pessimism, he, too, would unlikely do so. The difficulty in being a contrarian is that economists are aware of each other’s forecasts and have a natural herd mentality. If an economist were to stray from the herd by predicting a recession and the forecast turns out to be incorrect, career prospects would become sour. On the other hand, if he followed the crowd and missed calling a recession, he would be no worse than his peers.

As someone who is not employed in the securities industry, I suffer no such risk when going against the crowd. And in my short career as an individual speculator, I have found that being a contrarian can be far more rewarding.