### 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.
Investors brace for Federal Reserve Chair Jerome Powell's keynote address at the annual central banking symposium in Jackson Hole, which is expected to provide a sobering assessment of the long-term interest rate trajectory and has led to the dollar soaring and the euro/dollar exchange rate plunging to its lowest level in over two months.
Jeremy Siegel, known as the "Wizard of Wharton," believes that the US stock market is in a good position due to receding inflation threats, and that the housing market is resilient as investors view both as valuable hedges against inflation. Additionally, a softer labor market could delay the Federal Reserve's interest rate hike until December.
Despite diverse outlooks and mixed economic data, Mason King, a top financial advisor, remains cautious about predicting the market's future, highlighting the potential challenges of monetary restrictions and the uncertain impact of rate increases. However, he sees opportunity in technology and energy stocks, specifically in smaller and mid-cap growth companies, and emphasizes a longer-term investment approach.
Treasury Secretary Janet Yellen and Goldman Sachs may be optimistic about a "soft landing" scenario for the US economy, but the author remains skeptical due to factors such as a deeply inverted yield curve, declining Leading Economic Indicators, challenges faced by the consumer, global growth concerns, and the lagging impact of the Fed's monetary policy, leading them to maintain a conservative portfolio allocation.
The Federal Reserve's upcoming meeting will focus on the central bank's expectations for key indicators such as interest rates, GDP, inflation, and unemployment, while many economists believe that the Fed may signal a pause in its rate-hiking cycle but maintain the possibility of future rate increases.
Billionaire investor Bill Ackman predicts that the Federal Reserve is likely done raising interest rates as the economy slows down, but warns of continuing spillover effects and expects bond yields to rise further.
Morningstar's chief U.S. market strategist, Dave Sekera, is closely watching economic reports, including the ISM and PMI readings, as well as payrolls and unemployment data, while expecting a slowing rate of economic growth but no recession; Sekera also discusses the rising yields on the 10-year Treasury, their impact on the stock and bond markets, and provides insights into sector and investment style performance and valuation heading into the fourth quarter
JPMorgan Chief Market Strategist predicts a recession and discusses the Federal Reserve's stance on interest rates and the performance of mega-cap versus mid-sized stocks.
Investors are awaiting the jobs report to determine the Federal Reserve's next move on interest rates, with wage growth and revisions to previous monthly totals being key factors to watch, amidst indications that the economy is less sensitive to rising interest rates due to lower household and corporate debt levels.
The U.S. stock market is currently trading at a discount to fair value, and Morningstar expects rates to come down faster due to optimism on inflation; strong growth is projected in Q3, but the economy may slow down in Q4, and inflation is expected to fall in 2023 and reach the Fed's 2% target in 2024. The report also provides outlooks for various sectors, including technology, energy, and utilities, and highlights some top stock picks. The fixed-income outlook suggests that while interest rates may rise in the short term, rates are expected to come down over time, making it a good time for longer-term fixed-income investments. The corporate bond market has outperformed this year, and although bankruptcies and downgrades may increase, investors are still being adequately compensated for the risks.
Federal Reserve Chair Jerome Powell's upcoming remarks at the Economic Club of New York may provide insight into the central bank's strategy on interest rates, potentially affecting the market and indicating if the Fed agrees with recent speakers who believe rate hikes are over.
Bank of America's CEO Brian Moynihan predicts that rising interest rates and tightening lending conditions will lead to a slowdown in the U.S. economy, impacting consumer behavior and business decisions.
