A Deutsche Bank survey was taken recently and showed there is a 50-50 chance the U.S. could enter a recession within the next year, with 43% predicting a downturn. Although reports are showing low unemployment and strong numbers, there is a concern about a recession, but Federal Reserve Chair Jerome Powell acknowledging these worries while stating that the economy is still “strong overall.” However, the GDP growth forecast was changed down to 1.7% for the year, which is the lowest growth since 2011, and even raised the inflation forecast as well which is predicted at 2.8%, higher than the Fed's target. The mix of high inflation and slow growth has brought up the talk of stagflation.
With all these concerns, the market outlook has become a little nervous for investors, with a bond expert stating the likelihood of a recession at 50-60%. As I mentioned before, analysts warn that the U.S. may be headed toward stagflation. While some people like Jerome Powell don't believe there is a likelihood of a severe stagnation, firms like Barclays and UCLA Anderson are forecasting a slowdown. UCLA has said they are in a "recession watch" for the first time, explaining there are concerns about President Trump's tariffs and the possibility for a recession or stagflation if the administration continues to create policies that will only hurt ourselves.
I think that it will be interesting to see what the next few weeks and months have in store. Last month I looked at the 2 year and 10 year bond yields which were causing an inverted yield curve which is a leading indicator for a recession. Although it is not always correct in its assumption with the increased inflation and slowed growth it is not a good sign for the economy and there is good reason for uncertainty in the markets.
ReplyDeleteDeutsche Bank says there’s a 50% chance of a US recession, with rising inflation and slowing GDP growth fueling concerns of stagflation. Do you think Trump’s tariffs will push the economy closer to a downturn?
ReplyDeleteThe mixed signals in the economy right now highlight how difficult it is to make accurate forecasts. On the one hand, substantial employment numbers suggest stability, but downward GDP revisions and rising inflation raise concerns. What's interesting is how quickly talk has shifted from a soft landing to worries about stagflation. If consumer confidence starts to drop or corporate earnings begin to slip, the path toward a recession could accelerate. It'll be worth watching how the Fed and the administration respond in the months ahead, especially as policy decisions could tip the scale either way.
ReplyDeleteThe rise in inflation is definitely a cause for concern and the tariffs only add to that concern. The direction of trade policies and the response to inflation will likely play a major role in determining whether the U.S. can avoid a deeper recession.
ReplyDeletethere is definitely some concern with the rise in inflation already, I would assume the tariffs will only increase the likelihood of a recession. Although the housing market is still staying strong at the moment
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