- Economic growth is on the decline and economists are giving a 50% chance of a recession within the next year.
- In June The S&P 500 has tumbled nearly 4% to a new low for the year.
- These recession odds are speculative and you can’t bet on this outcome yet.
Economists are watching the economy closely and are increasing their chances of the economy entering a downturn in the foreseeable future. In the latest economic odds – Citigroup foresees a 50% probability of an incoming worldwide recession by 2018, while Goldman Sachs coiffures its chances of a recession in the United States over the next 12 months to be 30%.
“The experience of history indicates that disinflation often carries meaningful costs for growth and we see the aggregate probability of recession as now approaching 50%,” the Citigroup economists wrote in a note, according to Bloomberg.
Recession Odds Move in Favor of Global Collapse
The remainder of 2022 and 2023 are given a 50/50 chance that the US & Global economy will slip into another recession. While low-interest rates drove sales of housing throughout the pandemic. Now we are seeing inflated house prices peak with tightened interest rates. In addition to that, the invasion of Ukraine by Russia has dramatically increased inflation across the globe. All of these factors have driven up the prices of variable mortgage rates, price of rentals, and of course gas.
Not every economist is convinced through UBS, for example, which has a base case forecast of “no recession.” Mark Zandi, the chief economist at Moody’s Analytics, also thinks as things stand now, a recession is unlikely.
“The economy is slowing and it will be uncomfortable over the next 12 to 24 months, but I think we will make our way through it without a recession,” he said.
Of course, something could happen to change that projection.
“We are very vulnerable to anything else that could go wrong because things are so fragile,” Zandi explained.
S&P 500 could fall another 23%
The S&P 500 dropped 3.88 points to 3,749.63, marking its lowest mark since March 2021 and bringing its’ January losses to more than 21. The benchmark traded briefly in the bear market territory (down more than 20 from its high) on an intraday basis 3 weeks ago.
It’s not just the top 500 stocks that are down on average, cryptocurrencies are slammed this past 3 months. Bitcoin has been down 33% since last June, after it peaked in November 2021, at almost 70k USD per BTC.
Some investors on Wall Street say it is not an official bear market until the index closed there, and this took place yesterday. The last time the Dow closed in a bear market was in March 2020.
The Dow Jones Industrial Average sank 876 points, or 2.79, to close at 30,516.74. The Nasdaq Composite dipped tallies totaling more than 33% to finish the day at 10,809.23.
The majors hit their lows during the final thirty minutes after a Wall Street Journal report said that the Fed may consider increasing the federal funds rate by 0.75 percent on Wednesday, more than the one-half point increase forecast.
Meanwhile, In Canada, Armine Yalnizyan, economist and fellow with the Atkinson Institute, has forecasted that the likelihood of a recession exceeds 50 percent within the next six months to 12 months.
The nation’s Canadian economic output showed signs of growth in the first trimester of this year. But Antonios Yalnizyan notes that the US state of economy contracted in the first quarter of 2022, and the volume of applications for unemployment benefits rose south of the border to signal a potential cooling of the economic climate north.
Mild Recession Odds Given 99% Chance
A mild recession is almost a certainty given the economic outlook. Peter Boockvar explains that a mild drawn-out recession could actually be more detrimental to the global economy than a quick snap and recovery. This is expected to be confirmed by the end of 2022 or the beginning of 2023.
What is an Economic Recession?
The start of a recession is usually marked by two consecutive quarters of negative growth in a country’s gross domestic product. In the housing sector, which has already been showing signs of slowdown and price decrease, rising interest rates are often a tool used to slow the rate of inflation.
A recession is defined as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months,” according to the National Bureau of Economic Research.
Comment below on your prediction for the US, Canadian and global economy? Is a reset needed or will it be a stricter recession to climb out of than we’ve experienced recently?