[TheEpochTimesMay192022](The Epoch Times reporter Andrew Moran / Zhang Zhi compiled) Former Goldman Sachs CEO Lloyd Blankfein also joined the discussioneconomic recessionhe told CBS on Sunday that an economic downturn is a “very, very high risk factor.”
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It’s not just Blankfein who warns of shrinking GDP, many Wall Street analysts are increasingly worried,economic recessionLikely to be the base case for forecasts over the next 12 to 24 months.
Bloomberg’s recent monthly survey of economists found a 30 percent chance of a recession in the next 12 months, the highest in two years. That’s double the probability economists expected in February.
Morgan Stanley forecast (pdf), the probability of a recession in the next 12 months is 27%, up from 5% in March.
“Inflation now appears to be expanding and is likely to remain elevated for longer,” Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, said in each of her newsletters. “This scenario would put upward pressure on longer-term inflation expectations and put the Fed in policy acceleration mode,” the weekly report said.
Minneapolis Federal Reserve President Neel Kashkari said at a town hall event in Michigan on Tuesday that it was unclear whether the central bank would need to trigger a recession to lower inflation.
“My colleagues and I will do what we need to do to bring the economy back into balance,” he said, with many economists scratching their heads, “and wondering: If we really have to bring demand down to get the currency under control. Inflation, will that tip the economy into recession? We don’t know.”
Earlier, former Federal Reserve Chairman Ben Bernanke admitted that the central bank was acting too late in tackling inflation, telling The New York Times that the U.S. could slip into a period of stagflation.
Most CEOs are also preparing for a recession, according to a recent “CEO Confidence Index” from the Conference Board. The indicator fell into negative territory in the second quarter, falling to 42 from 57 in the first quarter.
While chief executives believe the Fed’s quantitative tightening policy will help fight inflation in the next few years, they worry that the central bank’s efforts will induce a recession.
“CEO confidence weakened further in the second quarter as executives grappled with price hikes and supply chain challenges compounded by the war in Ukraine and reimposed COVID restrictions in China,” said Datuk Dahl, chief economist at the Conference Board. “Expectations for future conditions are also dim, with 60 percent of executives expecting the economy to worsen over the next six months — an increase from the previous quarter,” Dana M. Peterson said in a statement. This is a marked increase from the 23% who hold this view.”
ING is not forecasting a recession this year, “but an approximation is likely in 2023,” James Knightley, the bank’s chief international economist, said in a note.
The Atlanta Fed’s GDPNow model showed growth of 2.4% in the second quarter.
Greg McBride, senior vice president and chief financial analyst at Bankrate, sees no signs of a recession now, as labor trends and consumer spending are strong.
“Even Q1 GDP (contraction) is not a sign of a recession, as the contraction is due to the trade deficit (rising imports in a strong economy) and inventory adjustments (fluctuating due to ongoing supply chain issues)”, McBray De told The Epoch Times that “recession fears are more about 2023 or even 2024 than 2022.”
Market strategist Sankar Sharma felt the same way, telling The Epoch Times that signs of recession are not widespread these days, but they could start to take shape in 2023 or 2024.
“We are in an environment of very low unemployment, millions of job openings, strong balance sheets of companies and banks, a strong and healthy financial system, and healthy earnings,” Sharma said. In Home Depot and Walmart’s results, we can see that consumers are still spending, credit markets are not under pressure, housing demand is not slowing significantly, and banks are still well capitalized.”
He added that ifU.S. economyAfter a hard landing after the Fed’s tightening cycle, the central bank may start cutting rates.
But will financial markets continue to ride a roller coaster over the next two years?
Read market data
U.S. stocks have had a rough 2022, with major benchmarks losing steam after two years of skyrocketing growth.
The Dow Jones Industrial Average has fallen about 12%. The tech-heavy Nasdaq Composite has plunged 25%, while the S&P 500 has fallen about 16%.
The U.S. Treasury market and the U.S. dollar index (DXY), a measure of the U.S. dollar against a basket of currencies, have surged this year. Commodities soared, while cryptocurrencies plummeted.
Heeten Doshi, founder of Doshi Capital Management, has lost several weeks in the stock space, saying in a report that it will take an average of 12 months to recover.
He wrote: “While the stats look positive (excluding 2008), the most shocking statistic is that, on average, after so many weeks of losses, it takes 12 months to recover.”
McBride said that because the market is forward-looking,investorDismal corporate earnings may be priced in “early”.
“One key could be the 2023 earnings guidance that companies provide in the fourth quarter of this year,” he added.
“If inflation subsides and the Fed is seen as able to fight a recession with lower rates, bond prices will recover some of the losses so far this year. But that depends on a few factors that will emerge over the next 12 months or so — Inflation, Fed policy and economic health.”
McBride believes that the best strategy for American households is to pay down debt, increase emergency savings and take advantage of market downturns.
“The risk of jumping out of the market is that you have to make two right decisions, not just one. You have to exit at the right time and re-enter at the right time,” he said.
Bank of America’s monthly survey of fund managers shows thatinvestorhave started to strengthen their cash positions. Asset managers have an average cash balance of 6.1%, the study reported, suggesting investors are hoarding the highest level of cash since the 9/11 terrorist attacks.
In the end, the strategist noted that this was underscoring “extremely bearish” positions in financial markets.
Responsible editor: Li Tongde #
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