AVENTURA, FLA. — U.S. leading economic indicators are showing signs of late-cycle behavior that suggest a “shallow” recession in 2020, Christian Lawrence, senior market strategist, Rabobank, said Feb. 25 at the International Sweetener Colloquium.

A negative yield curve, value stocks outperforming growth stocks, defensive stocks outpacing cyclical stocks, the rise of credit card debt and other evidence suggests a shallow recession in late 2020 that may last for only a couple of quarters and be followed by slow economic growth in 2021, Mr. Lawrence said. He expects the economy to slow ahead of the recession, with growth in the gross domestic product at about 2.4% this year, around 2% next year and 1.2% in 2021.

“Tight monetary policy and trade wars are weighing on the economy,” Mr. Lawrence said. The Federal Reserve will not be able to raise interest rates again during the current economic cycle, he said, and rather will begin cutting rates in June 2020 with a total reduction of 125 basis points.

A slowdown in the U.S. economy will lead to a slowdown in the rest of the world, although some countries in Europe, where he said the economic situation was “dire,” already were in a recession or narrowly avoiding one. Not much can be done from a monetary policy standpoint in Europe because interest rates already are so low or even negative in some cases.

He said “cheap money” in the United States since 2009 didn’t fuel real economic growth in part because of excessive debt, but instead led to asset price inflation as money was returned to shareholders instead of being plowed into manufacturing or other types of productive growth. Low unemployment was the result of cheap labor as wages have not kept pace with overall economic growth, he said, noting that wages should be higher when unemployment is so low. The lack of wage growth has fueled a rise in populism, which is evident in Europe and other regions.

Globally, Mr. Lawrence said the build-up of debt in China “has been terrifying” and can’t be sustained. China can’t stabilize its currency but can “kick the can down the road” a while longer because of its managed economy and longer-term outlook compared to the United States’ much shorter-term focus on the economy.

Still, the U.S. dollar as well as treasuries remain attractive to foreign investors, Mr. Lawrence said.

“The United States still is the safe haven of choice,” he said.

As a result, he expects the U.S. dollar will gradually strengthen over the next two to three years.