### Summary
Investor Jeremy Grantham warns that the U.S. will experience a recession next year due to the Federal Reserve's interest rate hikes and unsustainable asset prices.
### Facts
- Grantham believes the Fed's previous predictions and actions have been wrong, and it has failed to predict recessions in the past.
- He argues that the economy is still feeling the impact of the Fed's interest rate hikes, which are increasing borrowing costs and depressing real estate prices.
- Grantham criticizes the Fed for stimulating asset price bubbles with low interest rates and aggressive purchases of securities.
- He predicts that the unsustainable growth in asset prices and a lack of investment in key raw materials will lead to a recession.
- Economist David Rosenberg shares Grantham's bearish outlook and warns of headwinds to the U.S. economy, including China's economic issues and the end of the U.S. student debt relief program.
- Both Grantham and Rosenberg have had to push back their recession predictions but remain convinced that rising interest rates will eventually lead to an economic downturn.
More than half of U.S. small business owners believe the economy is in a recession, despite their own strong financial conditions and positive outlook for their local economies.
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.
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.
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 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.
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.
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 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 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.
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.
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.
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.
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.
Veteran economist David Rosenberg maintains his bearish call on the US economy, predicting a recession to hit about two years after the beginning of a rate hike cycle, with the fourth quarter of this year serving as a litmus test for his prediction.
A recession is highly likely in the US and investors should prepare for it by adopting a defensive strategy, according to the CEO of the TCW Group, Katie Koch, who believes that the Federal Reserve's interest rate hikes will start to have an impact and expects consumers and companies to struggle in this environment.
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.
Investors and experts differ on the timing, but many believe a recession is inevitable in the near future due to falling consumer confidence and a slowing economy, prompting discussions about the Federal Reserve's interest rate moves.
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.
Falling U.S. bond prices and the rapid normalization of the Treasury yield curve are signaling that a recession may be imminent, according to DoubleLine Capital founder Jeff Gundlach, who will be closely monitoring the September jobs report for further clues.
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 U.S. economy is showing mixed indicators, with rising interest rates, high inflation, and increased consumer spending, leading economists to question whether a recession is on the horizon.
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.
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.
Despite warnings from reliable leading indicators, the dominant view is that there will be a "soft landing" with a slowdown in the US economy but no recession, however, indicators such as the ISM Manufacturing New Orders Index suggest that a recession will begin within the next few months.
Economists are predicting that the U.S. economy is less likely to experience a recession in the next year, with the likelihood dropping below 50% for the first time since last year, thanks to factors such as falling inflation, the Federal Reserve halting interest rate hikes, and a strong labor market.
A recession is expected to hit the US economy in the next nine months due to rising borrowing costs, a tapped out consumer, and ongoing labor strikes, according to Raymond James.
David Rosenberg, a veteran economist, warns that investor complacency reminds him of the situation prior to the 2008 crash, predicting a recession in the US economy within the next few quarters due to various red flags such as high stock and home prices, debt levels, late payments, and bank troubles.
The U.S. economy is experiencing rapid growth, with GDP predicted to exceed 4% in the third quarter, but there are concerns that this may be followed by a recession due to factors such as stagnant incomes, cautious businesses, and economic uncertainties.
The US economy is heading towards a recession that is likely to be milder than previous ones, as it is being "engineered" by the Federal Reserve and they have the ability to reverse the measures that slowed growth.
The US economy experienced strong growth in the third quarter of 2023, fueled by consumer spending, but there are warning signs of a possible recession due to the impact of rate hikes on auto loans, credit cards, and student debt, as well as higher borrowing costs and the potential for deeper recession if the Federal Reserve continues to raise interest rates.
