The US economy has exceeded the Federal Reserve's estimate of its growth potential in recent years, with growth averaging 3% under President Joe Biden, but concerns about rising public debt and inflation, as well as the Fed's efforts to control them, may lead to slower growth in the future and potentially a recession. However, there are hints of improving productivity that could support continued economic growth.
Despite optimistic economic data and the belief that a recession has been avoided, some economists and analysts believe that a recession is still on the horizon due to factors such as the impact of interest rate hikes and lagged effects of inflation and tighter lending standards.
Recent profit reports from companies such as Amazon, Walmart, and Home Depot, along with other consumer statistics, indicate that the case for a 2023 recession is weakening, as the consumer economy shows resilience with rising real incomes, substantial savings, and continued spending in sectors like automobiles and services.
Despite the optimism from some economists and Wall Street experts, economist Oren Klachkin believes that elevated interest rates, restrictive Federal Reserve policy, and tight lending standards will lead to a mild recession in late 2023 due to decreased consumer spending and slow hiring, although he acknowledges that the definition of a recession may not be met due to some industries thriving while others struggle.
Recession fears return as a key business survey shows a significant contraction in the UK economy, signaling the detrimental effects of interest rate rises on businesses and heightening the risk of a renewed economic downturn.
Stocks are overvalued and a recession is expected in the first half of next year, according to economist Steve Hanke. He predicts that inflation will cool, Treasury yields will fall, and house prices will remain stable.
Investors are speculating about the likelihood of a recession after recent data showed a decline in job openings, and Key Advisors Wealth Management CEO Eddie Ghabour believes that the market is not prepared for a recession and it could bring about significant volatility. Ghabour highlights factors such as the JOLTS data, earnings season results, and housing market data to support his recession forecast. He also mentions concerns about rising inflation and its impact on the bond market. Ghabour predicts that a recession could lead to a double-digit drop in equity markets and suggests buying the long end of the Treasury curve as a top trade if a recession occurs.
Fidelity International's Salman Ahmed maintains his prediction of a recession next year, citing the full impact of the Federal Reserve's monetary policy tightening and a wave of corporate debt refinancing as leading factors.
Goldman Sachs has lowered its probability of a U.S recession in the next 12 months to 15% due to positive inflation and labor market data, while also predicting a reacceleration in real disposable income and expecting the Federal Reserve to keep interest rates unchanged.
Despite weak economic news and concern over a slowing economy, there is still optimism among investors that a recession is unlikely.
Goldman Sachs chief economist Jan Hatzius has revised his forecast for a U.S. recession in 2023, lowering the probability from 35% to 15% due to positive inflation and labor market news, while still expecting a mild economic slowdown.
The global economic slowdown and U.S. recession risks are causing concern among officials, with experts discussing recession forecasts and advising investors on portfolio and sector strategies.
Despite recent optimism around the U.S. economy, Deutsche Bank analysts believe that a recession is more likely than a "soft landing" as the Federal Reserve tightens monetary conditions to curb inflation.
Despite positive economic growth and low unemployment rates, several major indicators suggest that the American economy under President Joe Biden is heading towards a recession, with high government deficit numbers indicating possible overspending to prevent a recession before the 2024 election.
The possibility of a recession should not be dismissed by equity investors despite recent stock market rallies, warns economist Michael Darda, who notes that historical data shows that recession typically follows an inversion in the yield curve within an average of 14 months.
Former Goldman Sachs partner Abby Joseph Cohen believes that while a recession is not the most likely scenario, the probability of an economic downturn has been increasing in recent months due to weakening tailwinds and potential political issues.
The risk of overestimating the economy is now a real possibility as economic data continues to defy recessionary predictions, but the lagging production side of the economic equation and the deviation between GDP and Gross Domestic Income (GDI) suggest increased risk to the optimistic outlook and a potential recessionary warning.
The US economy is facing a looming recession, with weakness in certain sectors, but investors should not expect a significant number of interest-rate cuts next year, according to Liz Ann Sonders, the chief investment strategist at Charles Schwab. She points out that leading indicators have severely deteriorated, indicating trouble ahead, and predicts a full-blown recession as the most likely outcome. Despite this, the stock market has been defying rate increases and performing well.
The odds of the U.S. entering a recession by mid-2024 have decreased, but certain regions, such as the West and South, are still more vulnerable due to rapid economic growth, high home prices, and inflation, according to Moody's Analytics. However, a severe downturn is unlikely, and the Midwest and Northeast are less susceptible to a pullback. Overall, the chance of a recession has declined nationwide, but there is still a risk for some metro areas, such as Austin, Boise, Ogden, and Tampa.
Goldman Sachs CEO David Solomon believes the U.S. economy is unlikely to experience a significant recession, but warns that inflation will be more persistent than anticipated.
The risk of a global recession in the next 12 to 18 months is high, with financial markets underestimating the chances of a recession in the United States, according to PIMCO executives.
Jeremy Grantham warns of a looming recession by early 2025, expresses concerns about US stock market, economy, and financial system, discourages investment in real estate and commodities, but supports climate-change stocks like Tesla.
Entrepreneur Jaspreet Singh warns that signs of a potential recession in America include labor shortages, inflation-driven spending, and high interest rates, with economists predicting that the country may start feeling the effects of a recession by the second quarter of 2024. Singh advises Americans to educate themselves about saving money and investing to prepare for the possible downturn.
The 40-year period of economic expansion in the U.S. from 1980 to 2020 is likely to be replaced by a more regular cycle of boom-bust cycles and frequent recessions, according to analysts at Deutsche Bank, due to factors such as higher inflation and increasing debt-to-GDP levels.
The era of infrequent recessions may be coming to an end, as economists predict that boom-and-bust cycles will become the norm again due to growing national debts and inflationary pressures.
The Federal Reserve has paused raising interest rates and projects that the US will not experience a recession until at least 2027, citing improvement in the economy and a "very smooth landing," though there are still potential risks such as surging oil prices, an auto worker strike, and the threat of a government shutdown.
The forecasted U.S. recession in 2024 is expected to be shorter and less severe than previous recessions, with the economy's interest-rate sensitivity much lower due to reduced leverage and elevated savings from the postpandemic environment, leading investors to consider positioning for investment opportunities that will drive markets into 2024.
The U.S. economy is experiencing a higher share of working-age people in the workforce than ever before, and despite some inflationary concerns, the country is not at risk of a recession, according to economist Betsey Stevenson.