Merryn Talks Money: Why Recessions Aren’t What They Used to Be

Host: Merryn Somerset Webb (Bloomberg)
Guest: Vincent Delouarte, Director of Global Macro Strategy, Stonex Financial
Date: June 20, 2025

Episode Overview

In this episode, Merryn Somerset Webb is joined by Vincent Delouarte to discuss the fading presence of traditional recessions in modern economies, the shift from tangible to intangible assets, the implications for fiscal and monetary policy, the changing relationship between labor and capital, and the complex dynamics currently affecting US and European markets. Delouarte provides a nuanced, data-driven perspective on why recessions are less frequent and severe, what it means for investors, and how government policy and asset composition are reshaping the economic landscape.

Key Discussion Points & Insights

1. The Disappearance of Traditional Recessions

(03:23–08:44)

• Empirical Decline in Recessions

  • Delouarte observes that, excluding COVID, there hasn't been a true US recession in 16 years.
  • Recessions were common in the 19th century, but their frequency has steadily dropped due to policy evolution after the Great Depression and the rise of economic management tools.
  • "If you look at the 19th century, we spent almost half of that century in recession. And then the frequency of recession started to decline..." (Vincent, 03:40)

• Three Drivers of Recession 'Cancellation'

  1. Technological/societal shift: Move from agriculture to industry to services, then to intangible assets.
  2. Hyperactive economic policy: Governments now deploy aggressive tools to avoid recessions, accepting higher inflation as a tradeoff.
  3. Permanent fiscal stimulus: Entitlements and welfare spending keep the economy on a continuous upward trajectory.

• Outsourcing the Capital Cycle and Recessions

  • The US retains intangible assets and outsources tangible production—and thus economic volatility—to countries like China, South Korea, and Germany.
  • "We’ve kind of outsourced recessions to our trade partners." (Vincent, 06:37)

2. Intangible Assets and the Capital Cycle

(05:28–06:43)

• Intangible assets (brands, IP, network effects) spontaneously arise and aren’t "hostage to a capital cycle."
• No longer needing to finance or depreciate hard assets, US businesses are less exposed to cyclical downturns.
• "It's almost the opposite with intangible assets. ... We let other people take the hit of the capital cycle." (Vincent, 06:37; Merryn, 06:44)

3. Sustainability and Economic Momentum

(07:13–08:44)

• Delouarte compares the US to a bicycle: sustainable only as long as you keep moving (injecting stimulus).

• The system isn’t sustainable forever, but can endure longer than many expect—echoing Keynes:

  • "As John Maynard Keynes said, in the long term we’re all dead." (Vincent, 08:27)

• Two ways economies can "die":

  • Death by Ice (Europe): Slowdown, low inflation, stagnation (EU’s recent history).
  • Death by Fire (Emerging/Eg. Argentina): Overheating, high inflation, rapid capital flight.

4. Creative Destruction Without Recession

(09:37–11:23)

• Traditional theory holds that recessions enable "creative destruction." Delouarte counters:

  • Modern institutions (private equity, venture capital, etc.) now perform this function year-round without the need for recessions.
  • "Clearing out the carcasses is basically the job of private equity ... and the VC industry." (Vincent, 10:05)

• Innovation hasn't slowed—evidenced by advances from smartphones to AI—even in a prolonged absence of recessions.

5. Market Corrections Without Recessions

(11:23–14:28)

• Bear Markets Have Changed

  • Recent corrections, like 2022, were severe but short-lived thanks to the absence of an extended recessionary "tail" and quick rebounds in earnings and valuations.
  • "If I'm right and we don't have recessions, we only see the first part of this process, the valuation correction." (Vincent, 13:17)

• Investors return to equities quickly as earnings remain resilient; classic deep bear markets are unlikely while the earnings base is stable.

6. MAGA, Policy, and Shifting Tax Burdens

(17:16–21:58)

• Political changes (e.g., MAGA movement) could shift the US tax burden from labor to corporations.

  • New policies and tariff structures are designed to protect individual income while increasing effective taxes on corporate income.
  • "If I'm the US government and I'm looking for money, I'm going to take it where it is. And the money in the US is ... in corporate margins." (Vincent, 21:58)

• Corporate profits are well above historical averages; normalization could mean lower margins but not necessarily falling absolute earnings, especially if nominal growth is high.

7. Global Capital Flows and the End of US Capital Supremacy

(24:22–26:57)

• US policy shifts (taxation of foreigners, digital services taxes, tariffs) are discouraging inward capital flows.
• The US’s open-door capital policy is ending, with implications for the dollar and US markets.
  • "We are walking the way back [from treat all capital holders the same] ... barriers to the movement of capital ... financial repression." (Vincent, 25:45)

8. Near-Term Market Outlook

(27:07–29:00)

• Delouarte forecasts a likely US market correction in July 2025, citing:
  • Overstretched market highs
  • Rising yields (4.5–4.6% on the 10-year as a ‘pain point’)
  • End of the 90-day tariff pause and policy uncertainty
  • Potential reversal of positive inflation surprises
  • Earnings reporting blackout period (no buybacks)

9. Will Europe "Defrost"?

(29:00–30:52)

• Europe, pressured by US-led changes, may finally begin reinvesting in itself, reversing years of stagnation.
• Ending US openness to foreign capital may redirect flows home to Europe, bolstering growth.
• "Just bringing that money back means that the currency appreciate, energy costs fall, productivity picks up, yield curves steepen ... it's a pretty good outlook for ... Europe to catch up on what has been a 20-year crisis of confidence." (Vincent, 30:52)

Notable Quotes & Memorable Moments

• On the new recession paradigm:

  "We’ve kind of outsourced recessions to our trade partners."
  (Vincent Delouarte, 06:37)

• On government policy and sustainability:

  "Nothing is sustainable. If you think about a bicycle, a bicycle is always falling. It's only because you keep adding momentum to it that it doesn't fall... as John Maynard Keynes said, in the long term we’re all dead."
  (Vincent Delouarte, 07:13 & 08:27)

• On creative destruction:

  "Clearing out the carcasses is basically the job of private equity ... and the VC industry."
  (Vincent Delouarte, 10:05)

• On market corrections in a no-recession world:

  "If I'm right and we don't have recessions, we only see the first part of this process, the valuation correction."
  (Vincent Delouarte, 13:17)

• On the shift from taxing labor to taxing corporate income:

  "If I'm the US government and I'm looking for money, I'm going to take it where it is. And the money in the US is ... in corporate margins."
  (Vincent Delouarte, 21:58)

• On Europe finally "thawing":

  "Trump is basically forcing us to invest back at home by telling us that our money is no good in the US ... it's a pretty good outlook for ... Europe to catch up on what has been a 20-year crisis of confidence."
  (Vincent Delouarte, 30:52)

Timestamps for Important Segments

• 03:23 — The theory of "cancelled recessions"
• 05:36 — Why intangible assets smooth cycles
• 07:13 — Stimulus sustainability: The bicycle analogy
• 08:44 — Death by fire vs. ice; creative destruction without recession
• 11:58 — Can markets fall without recessions?
• 13:17 — Market corrections: valuation vs. recession
• 17:16 — MAGA, tax burden shift, and the fate of corporate earnings
• 24:22 — Taxing foreigners and capital flow reversal
• 27:07 — Short-term US market outlook: July correction warning
• 29:25 — Will Europe finally “defrost”?

Closing Note

Delouarte wraps up by mentioning his in-flight reading, humorously unrelated to finance—a reminder of the relaxed, insightful tone of the episode.

"I am reading how to Change, a book about the spread of psychedelics in the US in the 60s...it’s a fascinating read, but it’s not how I produce economic research. I keep the two activities separate."
(Vincent Delouarte, 30:59)

For listeners and non-listeners alike, this episode offers a concise, original take on why the economic and market playbook of old is no longer as relevant—and what investors should expect as the world transitions into a period of structural, policy-driven change in both the US and Europe.