Recession Fears Escalate as Economists Identify Warning Signs: ‘Will Materialize as Early as July’

Wall Street is buzzing with increasing speculation about a recession, as economists identify several indicators suggesting an impending economic downturn.

What Happened: According to a report, Goldman Sachs has raised its likelihood of a recession in the next 12 months from 15% to 20%. A March survey by Bank of America BAC showed that 55% of fund managers perceive a global recession triggered by a trade war as the primary tail risk for the market.

Consumer expectations of a recession in the upcoming year have also risen to a nine-month peak, according to the latest Consumer Confidence Survey by the Conference Board, reports Insider.

Economist David Rosenberg foresees a downturn in the next few months, highlighting several warning signs of a faltering economy.

Rosenberg points out several alarming signs including US households battling to keep up with inflation, an increased debt load, struggling small- and mid-cap stocks, and declining corporate earnings guidance.

Rosenberg stated, “If the past is prescient, the recession which nobody believes will rear its ugly head will materialize as early as July.”

Also Read: US Economy Teetering? Recession May Be Looming As Bond Market Reacts To Trump Policies

Households are increasingly unable to handle emergency expenses, with the latest Survey of Consumer Expectations from the New York Fed indicating that only 63% of US households could manage a sudden $2,000 bill.

This is the lowest percentage since Q4 2015, as per an analysis by Apollo Global Management APO. Moreover, total household debt increased by $93 billion in Q4, hitting a record $18 trillion.

Small- and mid-cap stocks are also struggling, with the iShares S&P Small-cap 600 Value ETF down 16% from its November peak and the S&P MidCap 400 down 13% from its November high.

Companies like Walmart WMT, Target TGT, and FedEx FDX have reduced their guidance for the year, with approximately 70% of companies attributing potential negative outlooks this year to uncertainty around new policies and tariffs.

Finally, bond investors are factoring in a higher risk of companies defaulting in the coming years. Credit spreads have significantly increased in the past month, indicating investors’ anticipation of a higher risk of corporate borrowers struggling to repay debt.

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