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.
Germany's economy stagnated in the second quarter of 2023, but it has officially emerged from the recession; however, the Bundesbank predicts that the economy will continue to stagnate in the third quarter and the IMF forecasts that Germany will be the only major advanced economy to shrink this year.
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.
The first nine months of 2023 have shown resilience in the market, with the Fed's tightening cycle dragging it higher, and there are concerns about wages, geopolitics, and weather impacting the economy.
The recent downturn in global property prices is expected to be over, with average home prices in major markets predicted to fall less than anticipated and rise into 2024 due to higher household savings, limited supply, and rising immigration, according to a Reuters poll of property analysts.
Mortgage rates remain elevated, slowing housing market activity, and while home prices are not likely to fall significantly, rates are projected to decrease in 2023 and 2024.
The US consumer is predicted to experience a decline in personal consumption in early 2024, which could lead to a potential recession and downside for stocks, as high borrowing costs and dwindling Covid-era savings impact household budgets.
Germany is predicted to experience a prolonged recession this year, making it the only major European economy to contract in 2023, according to the European Commission, with its growth expectations also being cut for 2024; this is attributed to struggles following Russia's invasion of Ukraine and the need to end energy dependency on Moscow.
The European Commission has revised down its economic forecast, citing high prices for goods and services as a significant factor, leading to reduced growth projections for the European Union and the eurozone. Germany is expected to experience a downturn, while inflation is projected to exceed the European Central Bank's target. Weak consumption, credit provisions, and natural disasters are also contributing to the loss of momentum in the economy. However, the report highlights the strength of the EU labor market with a low unemployment rate.
The 17.5% decline of the Swedish crown against the euro in the past 18 months is benefiting used-car dealers and exporters, but it is causing economic hardships for many Swedes through higher purchase costs and rising interest rates, which could lead to a prolonged downturn and slower green transition in the country.
Finland's economic downturn will be prolonged due to weaker export demand, a rapid slowdown in construction activity, and high interest rates, with the economy expected to contract 0.2% this year, according to the Bank of Finland.
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.
