BE CAREFUL! We Are Already in a Worse Recession - David Rosenberg Warning 2024 Recession
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Do you remember the Great Depression that began in the U.S. in 1929 and remained there till 1939 and affected many countries across the world? Though it may not reach that devastating level, a recession is looming large on the U.S. economy. According to 'Fox Business, BCA Research Chief Global Strategist Peter Berezin has warned of a recession either this year or in early 2025.
David Rosenberg, founder and president of Rosenberg Research, believes the recession may already be starting. He points out that we've essentially been in a recession within the housing market and manufacturing sectors. David questions where the narrative of a strong economy is coming from, suggesting that many are looking at the current situation through the rearview mirror. He notes that the pace of economic activity is weakening, dropping from a three-handle growth rate to a one-handle.
According to insights from J.P. Morgan, the U.S. economy is expected to decelerate, with real GDP growth forecasted to slow down to 0.7%. This slowdown is attributed to the effects of monetary policy and the diminishing post-pandemic tailwinds. However, this does not necessarily indicate a crash but rather a “soft landing,” a period of slower growth following an economic expansion.
The Conference Board shares a similar view, suggesting that while the U.S. economy entered 2024 on strong footing, consumer spending growth is likely to cool, and overall GDP growth may slow to below 1% during the second and third quarters of the year. This forecast aligns with the Federal Reserve’s projections, which anticipate U.S. GDP growth slowing to 1.4% in 2024.
David Rosenberg's perspective on the current economy reminds him of the 2007 narrative. His philosophy is straightforward: he doesn't believe in fairy tales and maintains that the business cycle hasn't been magically repealed. He highlights that last year's surprising 3% real GDP growth rate still has Jerome Powell talking about the economy being "solid and strong." David believes this is because many are looking at the economy through the lens of last year's events.
The U.S. is back on a "disinflationary path," Federal Reserve Chair Jerome Powell said on Tuesday, but policymakers need more data before cutting interest rates to verify that recent weaker inflation readings provide an accurate picture of the economy.
Data for May showed the Fed's preferred measure of inflation did not increase at all that month, while the 12-month rate of price increases has ebbed to 2.6%, still above the U.S. central bank's 2% target but on the way down after a scare in the first months of the year.
Fed Reserve's policymaking body Federal Open Market Committee in June projected just one percent economic growth for the financial year 2024-25. The Fed Reserve has raised interest rates four times in 2023.
David's highest conviction call is that the Fed will cut rates more aggressively in the next year than is currently priced in, leading the treasury market to deliver equity-like returns between now and 2025.
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