### Summary
The US economy and markets appear to be in good shape, with a strong stock market, low inflation, and low unemployment. However, there are potential risks on the horizon, including the impact of the Federal Reserve's monetary tightening, supply and labor shocks from the pandemic, political polarization, and the possibility of another government shutdown. While the overall outlook for investing remains uncertain, it's important for investors to prepare for any eventuality.
### Facts
- The US stock market is close to its 2022 peak, inflation is less severe than a year ago, and the economy remains strong with low unemployment.
- The Federal Reserve has raised interest rates by 5 percentage points, which could lead to economic growth faltering.
- The US economy is facing supply and labor shocks from the pandemic and commodity shortages caused by Russia's war with Ukraine.
- Falling prices in China could contribute to disinflation in the US and elsewhere.
- Political polarization in the US and the possibility of another government shutdown could negatively impact the economy and markets.
- Despite the resilience and stability of the economy and markets, there are still risks to consider, including a crisis in commercial real estate and the potential for inflation to flare up again.
- Some economists and surveys predict a 50% probability of a recession occurring within the next 12 months.
- Investing should be based on a long-term outlook and a diversified portfolio, with cash on hand to cover expenses.
Note: Due to the nature of the text provided, some of the facts may be subjective or based on the author's opinion.
A mild recession may benefit the housing market by leading to lower mortgage rates, more available supply, and potentially lower home prices.
Despite recent positive economic indicators, experts warn that a recession may still be on the horizon due to the lagged effects of interest rate hikes, increased debt, and a slowing manufacturing sector, cautioning investors not to become complacent.
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.
The UK and eurozone economies are at risk of recession due to a significant slowdown in private sector activity, with the UK experiencing its poorest performance since the Covid lockdown and Germany being hit particularly hard; the US is also showing signs of strain, with activity slowing to near-stagnation levels.
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.
The U.S. housing market is currently experiencing a decrease in affordability due to high mortgage rates and stubbornly high prices, with affordability levels lower than during the 2006 housing bubble; however, experts do not predict a crash in the market due to a shortage of homes and a more stable lending environment.
The recent downturn in global property prices is ending as average home prices are expected to fall less than anticipated and rise into 2024, according to a Reuters poll, due to factors such as high savings, limited supply, and rising immigration. However, this poses challenges for first-time homebuyers and rental affordability is expected to worsen.
Economist David Rosenberg warns that the US is likely to enter a recession within six months due to the deterioration of credit quality, reminiscent of the 2008 mortgage crisis.
Goldman Sachs predicts that the chances of the US falling into a recession within the next year have decreased to 15%, and its chief economist believes that the slowdown in the economy will be shallow and short-lived.
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.
The US economy is predicted to enter a recession by spring, leading to a 25% or more crash in the S&P 500, according to economist David Rosenberg, who warns that American consumers are nearing their spending limits and rising home prices reflect a weak housing market.
Deutsche Bank strategists warn that the U.S. economy has a greater chance of entering a recession within the next year due to high inflation and the Federal Reserve's aggressive interest rate hike campaign.
The odds of a recession in the US have collapsed, making markets vulnerable to any signs of the economy overheating and contributing to inflationary pressures.
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.
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.
There are indications that a severe economic contraction may be approaching in the US, with a significant decline in home sales and rising interest rates, similar to the 2008 financial crisis, according to Bloomberg analyst Mike McGlone.
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.
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 housing market is facing challenges due to high mortgage rates and low home sales, leading economists to predict a mild recession in 2024.
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 facing uncertainty and conflicting estimates, with regional Fed estimates showing significant divergence and risks of economic contraction or slow growth, while factors such as health insurance costs, wage growth, home prices, and rising gas and commodity prices could potentially cause inflation to rebound. Moreover, there are still risks and challenges ahead, making declarations of victory premature, according to Larry Summers.
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.
A drop in savings among Americans and record credit-card debt could have disastrous consequences for the economy if a recession occurs, as data shows personal savings rates remain historically low and many Americans have less than $5,000 in savings.
Economist David Rosenberg has not yet seen his recession prediction materialize, as the US economy has shown strength and resilience; however, he still believes a downturn is imminent and suggests investors focus on defensive sectors such as consumer staples, healthcare, telecommunications, and utilities. He also recommends considering long-term bonds as the best risk-reward prospects in fixed income.
The Canadian economy has entered a long-delayed recession due to highly indebted households, overvalued home prices, and a slowdown in consumer spending, with the recession expected to last until the first quarter of 2024 and result in a 1.5% decline in GDP and an increase in the unemployment rate to 7.2%.
The US economy has triggered the fourth and final signal for a potential recession, and historical data suggests that recessions will become more frequent in the future due to government interventions and other factors such as inflation, tightening monetary policy, oil price spikes, and tight government budgets.
The US economy is currently in decent shape, with a resilient labor market, moderated inflation, and expected strong GDP growth, but there are potential headwinds and uncertainties ahead, including UAW strikes, student debt payments resuming, and the risk of a government shutdown, which could collectively have a significant impact on the economy. Additionally, the labor market is slowing down, inflation remains a concern, and the actions of the Federal Reserve and other factors could influence the economic outlook. While there are reasons for optimism, there are also risks to consider.
There are four risks that could potentially push the US economy into a recession sooner rather than later, including a weakening labor market, headwinds for the consumer, high borrowing rates, and the rising chances of a government shutdown, according to Raymond James.
The risks of a near-term recession are increasing due to potential government shutdown and strikes in the auto industry, which are weighing on consumer confidence, according to J.P. Morgan Asset Management Global Market Strategist Jack Manley.
Deutsche Bank's economists are still predicting a US recession despite the ongoing resilience of the economy, pointing to rapidly rising interest rates, surging inflation, an inverted yield curve, and oil price shocks as the four key triggers that historically have caused recessions and are currently happening.
Experts are divided on the future of US home prices, with some predicting a surge and others expecting a decline, as homeowners are reluctant to sell their homes with cheap mortgages and buyers are hesitant to overpay. Jeremy Grantham believes prices will come down by 30%, while Barbara Corcoran predicts a surge of 15% to 20% once interest rates decrease. David Rosenberg forecasts a recession and a potential 25% plunge in house prices, while Glenn Kelman believes the housing market has hit rock bottom. Vincent Deluard expects prices to drop when homeowners eventually sell.
Falling bond prices in the US, resulting in higher Treasury yields, suggest that a recession might be approaching, according to investor Jeff Gundlach, who is closely watching the upcoming jobs report for further signs.
The likelihood of the US avoiding a recession has decreased, as two factors, including a surge in interest rates and the potential for resurgent inflation, could push the economy into a downturn, says economist Mohamed El-Erian.
The economy is not likely to enter a recession until late 2024 or 2025, and metro Phoenix is expected to perform better than other parts of the country, with Arizona projected to grow three times faster than the U.S. However, there is still uncertainty as key indicators point in different directions, and experts are monitoring factors such as inflation, job growth, and interest rates.
A new report warns that a recession may be imminent as employment, business optimism, and output continue to decline, with companies struggling to maintain staffing numbers and cope with higher borrowing costs and weaker customer demand.
Amidst economic uncertainty, experts predict a looming recession next year, with varying degrees of certainty, due to factors such as increased costs, global variables, and a potential decline in consumer spending.
The chances of the U.S. economy avoiding a recession are improving, with recession odds dropping to 46 percent, the lowest since the first quarter of 2022, according to economists surveyed by Bankrate. However, risks of a recession remain, with more than 2 in 5 economists suggesting that the chances are still greater than 50 percent.
