Recession

INVESTORS plagued by fear and shunning stocks are rediscovering a time-honoured antidote: US government bonds. Read more at The Business Times.

A bumpy fall into recession or a "soft landing" for the Federal Reserve? Goldman Sachs says the U.S. consumer could hold the key.

“The healthy private sector financial balance widens the Fed’s narrow runway for a soft landing.” “Recession risk has risen,” Goldman analysts wrote in a Monday note. During the pandemic, stimulus programs led to a multitrillion-dollar savings surplus for U.S. consumers, leaving the average American in a strong financial position. The figure has remained high and positive throughout the pandemic, meaning that households can continue to spend without the need to borrow or draw down asset holdings, Goldman says. The investment bank still isn’t calling a recession just yet. But on Monday, Goldman analysts led by Jan Hatzius admitted that risks to the U.S economy have grown over the past month.

Six in 10 Americans are worried that a sharp economic downturn could be around the corner. Here's what economists say.

"Our view is that the only way to minimize the economic, financial and societal damage of prolonged inflation is to err on the side of doing too much," noted Deutsche Bank chief economist David Folkerts-Landau in a research note. "The next couple of years will be bumpy ones for the economy, with high inflation and slower growth," said PNC Chief Economist Gus Faucher in a research note. "We think we'll see strong growth the remainder of this year." Credit rating agency Fitch forecast that the U.S. will have recovered all of the jobs lost during the COVID-19 pandemic by the third quarter of 2022. Their consensus forecast for 2023 is that GDP will grow by 2.3%, according to FactSet. Deutsche Bank thinks the Fed will follow its expected rate increase on Wednesday with two additional half-point increases later this year. (This chart from the Federal Reserve Bank of St. Louis shows when the U.S. entered and exited recessionary periods since 1970.) Businesses are constrained by supply-chain bottlenecks and employee shortages, adding to the costs of their operations. The central bank's strategy: Boost borrowing costs in order to tamp down demand from consumers and businesses. The central bank's rate-setting panel meets this week, and many analysts expect it to boost rates on Wednesday by half a percentage point, according to FactSet. Although economists don't predict a slump in the current year, consumers and businesses are battling several headwinds that are hitting their pocketbooks. Such monetary tightening, which is aimed at dampening inflation, could backfire if consumers and businesses pull back too quickly, according to experts.

(Bloomberg) -- It's the first day of speakers at the Milken Institute Global Conference in Los Angeles, which brings together everyone from dealmakers to ...

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The yield curve inversion is a telltale sign that a recession could be around the corner. But is it still reliable as an economic indicator?

"There is no guarantee we end up in a recession, because the Fed will be able to rethink, recalibrate monetary policy. "Every recession is different, but Fed hikes and commodity shocks have played a role in most recessions over the last few decades," the bank wrote. While a recession is a risk, it is not a guarantee, Daco said. "The private sector overall [is] running a healthy financial surplus,” Hatzius said. Right now, he said, a recession is not imminent. GDP represents the market value of goods and services produced in a country during a specific period of time. "This is noise; not signal," wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics research group, of the GDP data in a note to clients. The Fed has said it would raise the benchmark interest rate six more times in this year, meaning the cost of borrowing money — to buy houses, cars, take out student loans and carry credit card debt — will become more expensive. "So it showed up as a reduction in GDP, which meant purchasers were going to buy more foreign products and less American products." But we are not there yet." At the moment, it said, inflation is weighing heavily on real consumer spending, which has climbed just 2.4 percent year-on-year over the past three quarters. "People are feeling cautious — and we've just started to get higher interest rates," Knightley said.

One analyst worries inflation will force the Fed to hike rates "until it hurts," pushing the economy into a recession.

Uncertainty has come to a head in recent weeks, with the tech-heavy Nasdaq posting its worst month since 2008 in April, and data showing the U.S. economy shrank 1.4% last quarter despite expectations calling for 1% growth. The Fed concludes its next monetary policy meeting on Wednesday, when officials are expected to announce how aggressively they'll act to raise interest rates. “For the first time in 22 years, the Fed is poised to raise interest rates by more than a one-quarter percentage point increment, and at consecutive meetings for the first time in 16 years," Bankrate Chief Financial Analyst Greg McBride said in emailed comments Monday. After a 25-basis-point-hike in March, officials are expected to raise rates by 50 basis points this week, and as much as 75 basis points in June.

The Fed is too far behind the curve to bring down inflation without causing lots of unemployment.

In our assessment, the inflation problem facing the Fed today is substantial and unlikely to be resolved without a significant economic slowdown. But our research shows that the pressure to raise wages is even higher than indicated by the unemployment rate. Wage growth today is running at a historic rate of 6.6% and accelerating. In all three episodes, the Fed was operating in an economy with significantly higher unemployment, lower inflation and lower wage growth. This is the soft landing: Interest rates rise and demand falls enough to lower inflation, but the economy keeps growing. The Fed and professional forecasters project that inflation will recede to below 3% and unemployment will remain under 4% in 2023. Unemployment is very low today, and the Fed expects it to go even lower. The history of engineering soft landings is not encouraging, however. A tight labor market implies that companies need to raise wages to attract new workers. When demand runs too far ahead of supply, the economy begins to overheat, and prices rise sharply. That’s because high inflation and low unemployment are both strong predictors of future recessions. In the short run, the supply of goods in the economy is more or less fixed—there is nothing that fiscal or monetary policy can do to change it—so the job of the Fed is to manage total demand in the economy so that it balances with the available supply.

Recent yield-curve inversions and rising rates reflect bond investors' worry about growth prospects, Hunt said in a Bloomberg TV interview at the Milken ...

The U.S. economy has come a long way since the start of the COVID-19 pandemic. Back in April 2020, the national unemployment rate reached a record high. Now, ...

A better bet is to actively prepare for that possibility so you're covered no matter what turn the economy takes. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Because job loss is common during recessions, you'll want a means of paying your bills if you were to get laid off through no fault of your own. But it's always a good idea to prepare for any sort of extended economic downturn, and there are several steps you can take. Deutsche Bank cites plans on the part of the Federal Reserve to rapidly hike up interest rates as a potential recession trigger. The U.S. economy has come a long way since the start of the COVID-19 pandemic.

He also warned that Washington must get inflation down or risk wrecking the economy. Moore made the argument on "Varney & Co." four days after it was revealed ...

"I would not want to be at the Fed right now," he continued. If you don’t raise rates, you are going to have this inflation continue to rise." Moore asked, noting "if you raise rates, you are going to slow down the economy. Price increases were widespread: Energy prices rose a stunning 11% in March from the previous month, and are up 32% from last year. WORLD IN EARLY STAGES OF ‘VERY SIGNIFICANT’ RECESSION: ECONOMIST NANCY LAZAR Economist Steve Moore argued on Monday that the U.S. is "skating on the edge of a recession."

(Bloomberg) — It's the first day of speakers at the Milken Institute Global Conference in Los Angeles, which brings together everyone from dealmakers to…

The only way the Fed would be able to avoid a recession is to “let markets find a natural rate.” Article content “When volatility is 2008 or 2009 levels, that’s telling you that no one knows what this is going to be.” Article content Normally, the two have an inverse relationship. The high-quality part of the junk market should be able to withstand stagflation, at least compared with other asset classes, he said. Article content “It’s going to serve as both a hedge and a way to make money in your portfolio.” Article content You have a chance to make a lot of money, whether in investment grade or high yield.” Article content Article content