Bank of America, Morgan Stanley, and Deutsche Bank—some of Wall Street’s top banks—are predicting that U.S. stocks could crash more than 20% next year. The banks agree that the Fed can’t continue to increase interest rates to reign in inflation without triggering a recession. While the banks slightly disagree on when a drop in economic growth is coming, they agree that investors should prepare to see it at some point next year. In other news, the federal government is about to hit the debt ceiling, forcing officials to undertake a series of money-managing techniques to avoid exceeding the debt ceiling until Congress raises it.
Business Insider/Zahra Tayeb
From Bank of America to Morgan Stanley, Wall Street giants are expecting stocks to crash more than 20% next year. Here’s what they’re saying
Three top Wall Street banks are singing from the same downbeat hymn sheet, as each predicts US stocks could fall by more than 20% next year.
For Bank of America, a Federal Reserve-induced liquidity crisis could put pressure on the S&P 500 stock index. Meanwhile, Morgan Stanley and Deutsche Bank say lower earning outlooks and a US recession could trigger the selloff.
The benchmark index has risen from October lows to around 4,000, but analysts believe the rally is just a respite in the bear market it entered this year.
The Federal Reserve’s aggressive interest-rate hikes to combat inflation at 40-year highs, fears its tightening could tip the US into recession, and the fallout from Russia’s invasion of Ukraine have pulled the S&P 500 down 15% in 2022.
You can read the full story, here.
Fox Business/Peter Kasperowicz
Debt ceiling bomb nears as government spending balloons
The federal government is within spitting distance of the congressionally mandated limit on how much money it can borrow.
And it will soon be forced to undertake a series of money-managing techniques to avoid exceeding the debt ceiling until Congress raises it.
Under federal law passed in late 2021, the most the federal government can borrow is $31.381 trillion. Total national debt has already ventured slightly above that level, but a small portion of the debt is exempt from the debt ceiling – technically, the unamortized discount on Treasury bills. As of last week, total debt subject to the debt limit got as close as $31.345 trillion.
You can keep reading, here.
Kitco News/Cornelius Christian
A ‘real recession’ is likely in 2023, with ‘layoffs filtering through the economy’ – Will Rhind
The U.S. unemployment rate remains low at 3.7 percent, but a weakening economy and higher interest rates will trigger layoffs, causing a “real recession” in 2023, said Will Rhind, Founder and CEO of GraniteShares.
“Once those layoffs really start to hit, then we get into the real recession, which is going to come most likely some time next year,” he said. “The effects of the last couple of years mean that savings are still relatively healthy. I think that all changes, clearly, when we start to get these layoffs filtering through the economy, and indeed the labor market goes into reverse.”
Companies like Meta, Twitter, and Google have been laying off workers, and this “white collar” drop in consumer demand will drive job losses, said Rhind.
Read the full story, here.