“When we try to pick out anything by itself, we find it hitched to everything else in the universe,” wrote famed naturalist John Muir more than a century ago, referring to an epiphany he had while hiking in California’s Yosemite Valley.

In our call of the day, Blackstone BX, -0.51% strategist Joseph Zidle offers a similar take, but with dollar signs instead of granite cliffs.

“At the end of any economic cycle, we often get warnings that appear to be unrelated,” he wrote in a recent note. “It’s in hindsight that we realize that they were not at all random.” Investors saw this during the runup and aftermath of the housing bubble, he added, and we’re seeing it now.

Among the recent troubles he thinks are connected are repo market woes, negative-yielding debt, global trade conflicts and collapsing manufacturing. And every cycle ends with excess.

The “mother of all bubbles” in the sovereign debt market, Zidle says, is the catalyst that will likely trigger the next recession. He expects that to happen between mid-2020 and the end of 2021.

The good news for investors is a rise in quarterly profits that will boost markets in the near term. “The first three quarters of 2019 faced the toughest [comparables] since this profits cycle started in 2016,” he writes. “Earnings are flat this year. Next year, year-over-year comps should be easier.”

Zidle points out that stocks tend to rise until about six months before a recession, meaning there could be some market gains left. “Cyclicals and low-quality stocks should outperform in an improving earnings environment,” he said. “New highs in equity markets will likely be set.”…….More Here