Economists, investors, and the Federal Reserve have issued warnings of a potential recession, with differing timelines.
Recent predictions include:
- Bank of America CEO Brian Moynihan believes a recession could occur in early next year, contrary to his original forecast for this year.
- Vanguard economists see a higher probability of recession, potentially delayed from 2023 to 2024.
- JPMorgan Chase economists anticipate a synchronized global downturn in 2024.
Delaying recession predictions has become common, as previous expectations for a 2023 recession have weakened due to the economy’s resilience. Uncertainty persists, and the timing of a recession remains elusive.
The impact of the Federal Reserve’s rate hikes on the economy introduces a lag, with Chair Jerome Powell suggesting a year or more for their full effect.
If the economy maintains strength through the third quarter, Grecsek suggests that a recession might be avoided, though it remains distant at this point.
Market indications regarding recession odds vary across different segments:
- The stock market, in a bull market, shows little indication of an impending downturn.
- Small-cap stocks, seen as domestic economic indicators, have joined the rally.
- The S&P 500’s consumer discretionary sector thrives, supported by robust consumer spending.
- Money-market funds have experienced outflows, indicating increased market confidence.
- The bond market, with an inverted yield curve, suggests a higher probability of recession.
The absence of consensus among Wall Street analysts arises from the unique circumstances of the past few years, including the pandemic, government stimulus, and the Fed’s rate hikes. Mixed data further complicates the assessment of the economy’s trajectory, leaving markets uncertain about the future.
Analysis by Krystal Hur, CNN
Published 7:43 AM EDT, Sun July 2, 2023