Richard Kelly, head of global strategy at TD Securities, said on Monday (11th) that the U.S. economy has a more than 50% chance of falling into a recession next year, citing three ways it could be hit.
Kelly said,Rising gasoline prices, a hawkish Fed and a broad economic slowdownare the three risks currently facing the world’s largest economy.
Will this increase the chance of a recession? “I don’t think it’s just a possibility,” he said. “There’s more than a 50 percent chance of a recession in the next 18 months.”
Exactly when a recession might occur, however, is harder to predict.
Kelly said the economy could slip into a technical recession, or two consecutive quarters of negative growth, as soon as the end of the second quarter of 2022. Analysts will be keeping a close eye on the July 28 preliminary estimate from the Bureau of Economic Analysis.
Alternatively, the fallout from Russia’s unprovoked invasion of Ukraine and the surging gasoline prices following the Fed’s continued rate hikes could weigh on the economy by the end of the year or into early 2023.
If the U.S. withstands all conditions, a general slowdown could derail the economy in mid-to-late 2023.
“There’s really three deadly shots to the U.S. recession right now,” Kelly said. “We haven’t even reached the potential peak in gasoline prices, and the Fed rate hike really won’t happen until the end of the year. That’s the headwind in the economy.” The biggest. I think that’s where the near-term risk of a U.S. recession lies.”
“Then, if you go through that, as you get into mid-to-late 2023, there’s a gradual slowdown in the overall economy,” he said.
Investment firm Muzinich also agrees that the impending recession is not a question of “if” but “when.”
“There’s going to be a recession someday,” said Tatjana Greil-Castro, the company’s co-head of public markets, noting that the upcoming earnings season may provide a measure of when that might happen. Happening.
“The source of the profits is for investors to determine when a recession is likely to occur,” he said.
The comments join recent comments in the market suggesting the economy may be on the brink of a recession.
David Roche, senior investment strategist and president of Independent Strategy, said on Monday that the recent change in the global economic outlook made it easier to assess how different parts of the world might respond to various stresses.
“You can now make detailed forecasts for different parts of the world that are themselves very different from a simple full-blown recession,” he said.
Roach said he sees a recession as the loss of 2-3% of jobs in a given economy, suggesting that a U.S. recession may still be some way off. Data released by the US Bureau of Labor Statistics on Friday (8th) showed that job growth was stronger than expected, with nonfarm payrolls increasing by 372,000 in June, well above the expected 250,000.
He noted, however, that Europe was on the brink of what he called a “recession of war” and that the aftermath of the war in Ukraine was putting economic pressure on the region, especially energy and food shortages, “Europe could be hit by its own energy crisis, Hence the recession of war: the recession of war.”