Economists and CEOs Dismiss Looming Recession as Economy Shows Resilience

In a surprising turn of events, economists and CEOs are now dismissing the previously anticipated recession as the economy demonstrates resilience. Despite initial concerns and efforts by the Federal Reserve to curb economic activity through increased borrowing costs, the projected downturn appears to be postponed, with some experts suggesting it may not arrive at all.

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According to Amanda Agati, Chief Investment Officer for PNC Financial Services Asset Management Group, stated in a report, “Halfway through 2023, The market has told us: no recession, no correction, no more rate hikes.”

Contrary to expectations, the United States has experienced robust job growth, defying predictions of a slowdown. Labor Department reports indicate that employers have been adding an average of 310,000 individuals to payrolls each month. Hiring has even accelerated since March, with payroll numbers increasing by nearly 300,000 in April and 339,000 last month, despite a slight rise in the unemployment rate due to more people actively seeking employment.

While housing prices have declined in certain cities due to higher borrowing costs, a severe shortage of homes has kept prices elevated in many markets across the country, effectively averting the nationwide downturn predicted by some experts in the previous year.

“Wrong R-word”

According to Joe Brusuelas, Chief Economist at RSM, “People have been using the wrong R-word to describe the economy. It’s resilience not recession.” Although Brusuelas still believes a recession is highly likely, he now anticipates it to occur in early 2024, rather than in 2023. He suggests that a significant event or shock, such as an energy crisis or a debt ceiling showdown, may trigger the expected downturn.

“It’s not looking like this year maybe early next year. We need some sort of shock to have a recession. Energy could have been one, the debt ceiling showdown could have been one and it still could.” He stated.

One significant factor contributing to steady consumer spending, which constitutes approximately two-thirds of U.S. economic activity, is the substantial excess savings accumulated by Americans. Even with the highest inflation in four decades, individuals possess nearly $500 billion in surplus savings compared to pre-pandemic levels. This surplus is predominantly held by those earning $150,000 or more annually, accounting for 62% of all consumer spending. Brusuelas believes that this accumulated wealth will sustain household spending throughout the remainder of the year.

“That’s enough to keep household spending elevated through the end of the year,” Brusuelas said.

Coin toss

Simon Hamilton, Managing Director and Portfolio Manager for the Wise Investor Group of Raymond James, assesses the likelihood of a recession as a 50-50 chance, comparable to a coin toss.

“The reason those odds aren’t higher is because people are still working! It’s almost impossible to have recession with unemployment this low,” he shared his opinion in a note to investors.

Consumers, too, have adopted a cautiously optimistic outlook, as highlighted by a recent Deloitte survey. The survey revealed a significant decline in the number of individuals concerned about the economy or their financial situations compared to the previous year. The most recent University of Michigan survey on consumer confidence also indicated a slight increase in sentiment last month.

However, it is important to acknowledge that the delayed onset of the expected recession suggests an economy losing momentum. Business investment is waning, and manufacturing and construction activity has slowed due to higher borrowing costs.

In a report published this week, analysts at Oxford Economics wrote, “The economy is holding up reasonably well but faces several hurdles during the second half of the year, including the lagged effect of tighter monetary policy and stricter lending standards.”

While the possibility of a recession occurring later this year cannot be ruled out, experts remain divided on the severity and timing of the potential economic downturn. The resilience demonstrated by the economy thus far has provided some optimism, but risks and uncertainties still loom on the horizon. Analysts and investors will continue to monitor key indicators and events closely to assess the future trajectory of the economy and whether the anticipated recession will eventually materialize.

Anticipated Recession Casts Shadows of Uncertainty over Stock and Crypto Markets

With the possibility of an impending recession on the horizon, investors in both traditional stock markets and the burgeoning crypto market are preparing for potential turbulence ahead. The anticipated economic downturn has cast shadows of uncertainty over these investment landscapes, leaving market participants speculating about the potential impact on their portfolios.

As the stock market has been a traditional barometer of economic health, the looming recession has sparked concerns about the performance of equities. Historically, during economic contractions, stock prices tend to face downward pressure as businesses face challenges and consumer spending contracts. The prospect of weakening corporate earnings and a slowdown in business activity has left investors wary, with some adjusting their strategies in anticipation of a market downturn.

Additionally, the crypto market, known for its volatility and lack of correlation with traditional markets, has been closely watched by investors seeking alternative investment avenues. Cryptocurrencies have experienced substantial growth in recent years, but the potential recession could pose unique challenges for this digital asset class. As the economic landscape shifts, investors are pondering whether cryptocurrencies will retain their value or experience a significant correction.

“I’m not sure crypto can be considered a safe haven given its volatility,” says Scott Sheridan, CEO of online brokerage firm tastytrade.

Market experts suggest that both the stock and crypto markets could witness increased volatility in the face of an economic downturn. As investors seek to protect their investments and mitigate risks, there may be a shift towards more defensive stocks, such as those in sectors like healthcare, utilities, and consumer staples. These industries are typically considered less sensitive to economic fluctuations and are often perceived as safer havens during uncertain times.

“Bitcoin tends to show a positive correlation with the stock market, so from that point of view, a move in line with other risk assets makes sense,” says Julius de Kempenaer, senior technical analyst at StockCharts.com.

In the crypto market, the reaction to a recession is less predictable. While some investors may view cryptocurrencies as a potential hedge against traditional market volatility, others may perceive them as high-risk assets susceptible to market downturns. The decentralized nature of cryptocurrencies and their detachment from traditional economic indicators make it challenging to forecast their performance during a recession accurately.

Investors and analysts will closely monitor key economic indicators, central bank policies, and geopolitical developments to gauge the potential impact of the expected recession on both the stock and crypto markets. The timing and severity of the economic downturn will be crucial in determining the extent of the influence on investment portfolios.

It is important to note that market projections and forecasts are subject to change as new information emerges. Investors are advised to exercise caution, diversify their portfolios, and seek professional guidance to navigate the uncertainties associated with the anticipated recession and its potential effects on the stock and crypto markets.

Disclaimer : The above is a sponsored article and the views expressed are those of the sponsor/author and do not represent the stand and views of The Tribune editrial in any manner.