Warning Signs Flashing: US Economy Faces Looming Recession, Expert Warns
Disclaimer: The information provided in this news item is based on expert analysis and research. Readers are advised to conduct their own due diligence and consult with financial professionals before making any investment decisions.
By Doug Young – 25 September 2024
Introduction
The United States economy is facing a critical moment as an expert economist issues a dire warning of an impending recession.
Peter Berezin, renowned PhD economist and investment strategist, and chief global strategist at BCA Research, has raised concerns about the current state of the economy, urging investors to brace themselves for potential turbulence ahead.
Weakening Labor Market
One of the primary indicators signaling an economic downturn is the weakening labor market. Berezin highlights a significant decline in job openings, making it increasingly difficult for those who have lost their jobs to secure new employment.
In early 2022, there were two job openings for every unemployed worker. However, this ratio has dramatically dropped to just 1.1 jobs for every unemployed worker, a staggering 50% decline in the past two years.
Economic Indicators
Several economic indicators further support Berezin’s recession case.
The personal savings rate has dwindled to 2.9% in July, less than half of what it was in 2019. Additionally, consumer loan delinquency rates have surged to levels last seen in 2010, a year marked by a higher unemployment rate.
Home builder confidence also took a hit in August, reaching the lowest level so far this year.
Commercial Real Estate Weakness
Another concerning factor is the persistent weakness in the commercial real estate market.
Berezin points out that office vacancy rates have reached an all-time high, with Moody’s Analytics reporting a national vacancy rate of 20.1% in the second quarter of this year, the highest percentage recorded since 1979.
Manufacturing Sector Slowdown
The manufacturing sector, often considered a key driver of economic growth, is also experiencing a slowdown.
Berezin highlights the decline in the new orders component of the Institute for Supply Management Manufacturing Index, which fell to its lowest level since May 2023 in August.
This decline raises concerns about the overall health of the economy.
Federal Reserve’s Role
While some may hope for the Federal Reserve to intervene and mitigate the impact of a potential recession, Berezin warns against overreliance on the central bank.
He notes that history has shown recessions occurring shortly after the Federal Reserve started lowering interest rates in January 2001 and September 2007.
Consequences for Investors
Berezin’s projected recession carries significant consequences for investors.
He predicts that the S&P 500 could plummet to 3800, representing a nearly one-third drop from its current levels. In light of this forecast, investors are urged to take proactive measures to hedge and diversify their portfolios.
Berezin emphasizes the importance of considering uncorrelated real assets, such as precious metals, which have the potential to demonstrate resilience and durability during economic downturns.
Conclusion
As the warning signs of a potential recession continue to mount, investors are advised to take decisive action.
Berezin’s expertise and analysis serve as a reminder of the importance of preparing for potential economic challenges. By hedging and diversifying their investments, investors can safeguard their portfolios and navigate through uncertain times with greater resilience.
Disclaimer: The information provided in this news item is based on expert analysis and research. Readers are advised to conduct their own due diligence and consult with financial professionals before making any investment decisions.
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