Strategist sees signs of drastic recession in 2024

• Strategist expects a hard landing for the US economy
• Interest rate cuts only after the economic downturn
• Experts disagree

Despite a series of interest rate increases by the US Federal Reserve and the European Central Bank (ECB), investors in the stock market remain undeterred. The broad US index S&P 500 has gained around 24 percent so far this year, while the tech stocks index NASDAQ Composite has increased by 43.35 percent since the start of the year (closing prices on December 19, 2023). In the last few weeks in particular, the US indices have picked up speed, which Paul Dietrich from Briley Wealth interprets as a warning signal.

S&P rally worries the strategist

In a note quoted by Business Insider, the market strategist warns of a number of recession signals, including current developments in the labor market and the explosive rise in the stock market. For the expert, these are indications that the USA could enter a severe downturn at the beginning of 2024. The recent rally was largely fueled by expectations that the Federal Reserve will cut interest rates early next year – but rate cuts are unlikely to come until the economy enters a downturn, Dietrich warned, according to the economic portal. “Investors should not expect the central bank to cut borrowing costs unless the US economy enters a severe recession – which could happen early next year,” the market strategist continued. Typically, the US Federal Reserve only begins to cut interest rates when the economy is in a severe downturn and unemployment is rising – “which means a recession,” summarizes Dietrich.

He also refers to historical developments and emphasizes that the S&P 500, for example, also rose sharply in the months before the recessions of 2001, 2008 and 2020, before the economy began to shrink.

More recession signals

The expert has also identified further recession signals. The equally weighted S&P 500 index, which he considers to be more representative of average stocks, has fallen into correction territory. In addition, there are negative signals from US labor marketwhere the number of vacancies has declined, while at the same time ongoing claims for unemployment benefits have steadily increased.

“To believe that we will not experience a normal cyclical bear recession after a 13-year bull market is to believe that the business cycle has been miraculously reversed after 400 years of historical cyclical stock market data. Believing that it will be different this time “But that’s never the case,” warned Dietrich.

The mood among experts is not clear

Most recently, UBS experts also predicted a likely recession in the USA for 2024. According to experts, the recession in the USA is likely to begin in mid-2024, which will ultimately result in massive interest rate cuts from the Fed.

Albert Edwars, analyst at Société Générale (SocGen), even believes that the recession has already begun in the USA and also points to developments in the labor market, among other things.

Meanwhile, JPMorgan boss Jamie Dimon doesn’t see it quite so bleak, but recently warned that the danger of recession in the USA has not yet been averted.

But not all market observers still expect that the USA will inevitably slip into a recession next year. The New York Fed has reduced its twelve-month recession forecast to just 51 percent – at the start of the year the value was still over 70 percent.

And Bank of America is also cautiously optimistic: “The recession that many expected in 2023 never came. In many regions, inflation rates peaked in the fall of 2022 and disinflation continued throughout 2023, although the Economies in general were stronger than expected,” said experts at Bank of America Global Research in their annual outlook. For 2024, strategists expect a soft landing for the US economy and new all-time highs on the stock market.

Editorial team finanzen.net