Richard Kelly, head of global strategy at TD Securities, stated on Monday that there is a greater-than-50-percent chance that the U.S. economy would enter a recession by next year and outlined three potential ways it may be affected.

According to Kelly, the threats posed by rising gas costs, a hawkish Federal Reserve, and a generally sluggish economy are currently threatening the world’s largest economy.

Could this increase the likelihood of a recession? He stated on CNBC’s “Street Signs Europe”: “I do not believe it has any promise.”

Kelly continued, “The likelihood of a recession in the next 18 months is greater than 50 percent.”

However, it is more difficult to anticipate exactly when this decline will occur.

As soon as the end of the second quarter of 2022, according to Kelly, the economy might enter a technical recession, which is defined as two consecutive quarters of negative growth. On July 28, analysts will closely monitor the Bureau of Economic Analysis for early estimates on this matter.

Alternatively, the Fed’s sustained interest rate hikes and the consequences from soaring gas costs following Russia’s unjustified invasion of Ukraine might both weigh on the economy by the end of the year or early 2023, he warned.

And if the U.S. manages to weather all of that, a broad downturn may not derail the economy until mid- to late-2023.

Kelly stated, “You have three opportunities for a recession in the U.S. economy right now.”

“We haven’t even reached the peak lags from gas prices, and Fed rate rises won’t actually occur until the end of the year. This is where the greatest economic drag is. I believe that is where the risk of a U.S. recession in the near future currently lies,” he concluded.

Then, as we approach the middle or latter half of 2023, there will be a modest slowdown in the general economy.

Monday, investment company Muzinich concurred that a recession was not a matter of “if” but “when.”

Tatjana Greil-Castro, co-head of public markets, stated, “There will be a recession at some time,” adding that the upcoming earnings season could provide an indication of when this would occur.

Investors can determine the likelihood of a recession based on the source of incoming profits.

The opinions add to the chorus of voices that have speculated that a recession may be imminent.

David Roche, a seasoned financial strategist and the president of Independent Strategy, stated on Monday that the global economic outlook has lately evolved, and it is now simpler to predict how various regions of the world will react to various challenges.

“You can now generate specific forecasts for many regions of the world that are vastly different from the simple global recession picture,” he explained.

Roche defined a recession as the loss of 2% to 3% of jobs in an economy, indicating that a U.S. recession may be some time away. The Bureau of Labor Statistics reported on Friday that non farm payrolls increased by 372,000 in the month of June, which was significantly more than the 250,000 predicted.

However, he stated — not for the first time — that Europe is on the verge of what he refers to as a “war-cession” due to the impact of the war in Ukraine on the region’s economy, notably in terms of energy and food shortages.

“Europe may have a unique energy crisis that causes the war-cession.” “The war-induced economic downturn,” he stated.
It comes as the principal pipeline bringing natural gas to Europe from Russia, Nord Stream 1, is shut down for maintenance this week, prompting concerns that it could be shut down permanently owing to ongoing conflicts over Ukraine sanctions.

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Reference:

Gilchrist, K. (2022, July 11). U.S. recession looks likely – and there are 3 ways the economy could get hit, analyst says. CNBC. Retrieved July 12, 2022, from www.cnbc.com/2022/07/11/us-recession-looks-likely-there-are-3-ways-the-economy-could-get-hit.html?&qsearchterm=U.S+recession