The likelihood of a U.S. recession is rising, says former Treasury Secretary Larry Summers, after data released this week showed a bigger slowdown than anticipated. “Recession probabilities are going up at this point. And I think the Fed’s got very, very difficult decisions ahead of it—with very much two-sided risk,” Summers warned, pointing to the consequences of an overheated economy. “The Fed needs to do some very fundamental reflection on what kind of financial system they want to see us move into,” he added. Summers isn’t the only expert ringing recession bells this past quarter; expert investor Jeremy Grantham has warned stocks could crash as much as 50% as the “everything bubble” bursts, while top economist Nouriel Roubini forecasted the U.S. entering a “doom loop” that only a severe recession could end. After the recent banking crisis, it seems that Fed Chair Jerome Powell’s hopes for a soft landing are becoming much more unlikely.
Fortune/Christopher Anstey & Bloomberg
Larry Summers says the good jobs numbers don’t tell the whole story—and, in fact, the risk of recession is rising
Former Treasury Secretary Lawrence Summers said the likelihood of a US recession is rising after a series of weak economic indicators and that the Federal Reserve is approaching the end of its series of interest-rate hikes.
“What’s pretty clear is that we’re in the very late innings of the current tightening cycle,” Summers said on Bloomberg Television’s “Wall Street Week” with David Westin. “Whether there’s going to be another move necessary or not, I think that’s a judgment they should be holding off on until the very last kind of moment,” he said of Fed policymakers, whose next decision comes May 3.
Summers discounted Friday’s March jobs report, which he said reflected the strength of the economy early in the first quarter but is now less relevant given prospects of a tightening in credit. The data showed another firm gain for US payrolls, with the unemployment rate dipping to 3.5%.
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Business Insider/Zahra Tayeb
US stocks face a 50% crash, a ‘crypto apocalypse’ is coming, and the economy is entering a ‘doom loop.’ Here are the 10 wildest predictions over the past quarter.
From stocks and cryptocurrencies to commodities, it appears a growing number of assets are in choppy waters.
Jeremy Grantham has warned stocks could crash as much as 50% as an “everything bubble” bursts, while “Dr. Doom” economist Nouriel Roubini has raised the alarm on an impending “crypto apocalypse” as the SEC tightens its grip on the digital asset space.
While various headwinds are buffeting assets, the Federal Reserve’s interest rate hikes seem to be weighing the most on financial markets.
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The New York Times/Jeff Sommer
U.S. Economy May Be Heading to a Place That Must Not Be Named
Recession has become a nasty word. Federal Reserve officials dance around it with euphemisms like “a soft landing” or its dreaded alternative, “a hard landing.”
Look beneath the hood of Fed forecasts, though, and it’s clear that central bank policymakers recognize that there is a good chance of a sharp slowdown soon. Their own policies are at least partly responsible for making that happen.
The odds of such a slowdown over the next year are fairly high, I’d say, whatever label the authoritative arbiter of such things, the National Bureau of Economic Research, ends up giving the 2023 economy months or years from now. This emphatically does not mean that there will be a recession — or that I or anyone else has the ability to predict one with precision. But I think there’s enough reason to suspect that rough times are coming to factor that possibility into your personal planning.
You can read the full article, here.
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