The U.S. economy is forecasted to be growing rapidly, which is causing concern for the Federal Reserve and those hoping for low interest rates.
Goldman Sachs analysts predict that the U.S. government is "more likely than not" to shut down later this year due to spending disagreements, which could temporarily impact economic growth by reducing it by 0.15-0.2 percentage points per week, with past shutdowns having minimal impact on equity markets.
The US banking industry could face a significant drop in stock prices within the next 16 months if the economy enters a recession, according to macro guru Hugh Hendry.
The majority of economists polled by Reuters predict that the U.S. Federal Reserve will not raise interest rates again, and they expect the central bank to wait until at least the end of March before cutting them, as the probability of a recession within a year falls to its lowest level since September 2022.
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.
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.
A global recession is looming due to rising interest rates and the cost of living crisis, leading economists to warn of a severe downturn in the post-Covid rebound.
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.
Top economist David Rosenberg predicts that the US will experience a recession within the next six months due to the aggressive interest rate hikes by the Federal Reserve and the erosion of credit quality in credit card debt.
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.
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.
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.
Mortgage rates have slightly decreased from their peak in late August, but future trends will depend on the economy and inflation rates, with potential decreases if inflation slows and the Federal Reserve stops increasing its benchmark rate.
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.
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 Federal Reserve should consider cutting its policy rate within the next six months to stabilize real rates and avoid tipping the economy into a recession, as financial stress in the real economy is rising despite slower hiring and inflation cooling, according to economist Joseph Brusuelas.
Goldman Sachs and J.P.Morgan have revised their full-year growth forecast for the UK's GDP due to a sharp contraction in the economy in July, with JPM now expecting 0.4% expansion and Goldman Sachs projecting 0.3% growth. Economists warn of the possibility of a recession as poor economic data continues to emerge, and GDP data indicates a weakening economy.
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.
The Federal Reserve Bank of New York's recession probability tool, which examines the difference in yield between the 10-year U.S. Treasury bond and three-month bill, suggests a 60.83% probability of a U.S. recession through August 2024, indicating that stocks may move lower in the coming months and quarters. However, historical data shows that U.S. recessions are typically short-lived, and long-term investors have little to worry about.
Economist Campbell Harvey warns that the Federal Reserve should not raise rates later this year, as he believes a recession may occur in 2024 due to an inverted yield curve and potential distortions in Bureau of Labor Statistics and GDP figures.
Goldman Sachs warns that three factors - the resumption of student loan payments, the autoworkers' strike, and a potential government shutdown - could lead to a significant slowdown in US GDP growth during the fourth quarter of 2023.
Goldman Sachs strategists predict that the Federal Reserve is unlikely to raise interest rates at its upcoming meeting, but expect the central bank to increase its economic growth projections and make slight adjustments to its interest rate projections.
The Federal Reserve's restrictive monetary policy, along with declining consumer savings, tightening lending standards, and increasing loan delinquencies, indicate that the economy is transitioning toward a recession, with the effectiveness of monetary policy being felt with a lag time of 11-12 months. Additionally, the end of the student debt repayment moratorium and a potential government shutdown may further negatively impact the economy. Despite this, the Fed continues to push a "higher for longer" theme regarding interest rates, despite inflation already being defeated.
Market analyst Ed Yardeni has increased the chances of a recession by the end of next year from 15% to 25%, citing rising oil prices and widening deficits as contributing factors, although he notes that a repeat of the 1970s is unlikely due to the expected productivity boom.
Average mortgage rates have decreased for 15-year fixed, 30-year fixed, and 5/1 adjustable-rate mortgages, although they remain above 7%, and experts predict that the Federal Reserve will refrain from raising rates in its September meeting.
The Federal Reserve has revised its interest rate forecast, planning for fewer rate cuts next year than previously anticipated, which may not be favorable for borrowers.
The Federal Reserve has left interest rates unchanged but indicated the possibility of one more rate hike, causing U.S. markets to slump and Treasury yields to rise, while European markets saw gains; Instacart shares sank, Klaviyo shares jumped, and Arm shares continued to slide; UK inflation for August was lower than expected, throwing the Bank of England's next move into question; Goldman Sachs has raised its 12-month oil price forecast to $100 per barrel.
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 leading economic indicator dropped 0.4% in August, marking the 17th consecutive month of decline, but there is no indication of a recession in the U.S.
The bond market's recession indicator, known as the inverted yield curve, is likely correct in signaling a coming recession and suggests that the Federal Reserve made a major mistake in its inflation policy, according to economist Campbell Harvey. The yield curve, which has correctly predicted every recession since 1968, typically lags behind the start of a recession, with the average wait time being 13 months. Harvey believes that a recession is imminent due to the Fed's tight monetary policy and warns against further interest rate hikes.
The Federal Reserve's measure of inflation is disconnected from market conditions, increasing the likelihood of a recession, according to Duke University finance professor Campbell Harvey. If the central bank continues to raise interest rates based on this flawed inflation gauge, the severity of the economic downturn could worsen.
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.
