The U.S. economy is “actually still doing well” but the prognosis for the economic future is “very, very serious,” said JPMorgan Chase CEO Jamie Dimon. Dimon warned that the U.S. and global economy are likely be a recession by the middle of 2023, according to an Oct. 10 CNBC interview.
Interest rates rising more than expected, runaway inflation, the unknown effects of quantitative tightening and Russia’s war in Ukraine are all setting off alarms, Dimon said “Europe is already in recession — and they’re likely to put the U.S. in some kind of recession six to nine months from now.”
The big U.S. banks are expected to report their third-quarter earnings on Friday, Oct. 14.
Recession fears are rising among other economists, analysts, and stakeholders.
The Conference Board, a nonprofit membership-based research organization that distributes economic information, forecasts a 96 percent chance of a recession — most likely in the fourth quarter of 2022 and first quarter of 2023, thanks to Federal Reserve interest rate hikes.
“While recession probability hovered near zero after the initial phase of the global pandemic from September 2020 to March 2022, it rose to over 30 percent in April and reached 50 percent in May. This means that the US economy is likely to enter a recession within a year from that point onward. The probability has kept rising since then,” wrote Erik Lundh, principal economist for the Conference Board.
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The Fed raised benchmark interest rates by three-quarters of a percentage point in September for the third consecutive time and signaled it would continue hiking rates above the current range of 3-to- 3.25 percent.
The market is pricing in an 81-percent probability of a 75 basis point hike in November, according to the CME FedWatch Tool, which analyzes the probability of rate moves in upcoming meetings by the 12 Federal Reserve Board members of the Federal Open Market Committee.
All three major U.S. indices are trading in bear market territory and the S&P 500 index has lost about 24 percent this year so far. Dimon predicted the S&P 500 could fall “another easy 20 percent” from current levels. The next 20 percent decline will likely “be much more painful than the first,” according to the CNBC report.
In June, Goldman Sachs predicted a 30 percent chance of recession in the U.S. over the following year. Economists at Morgan Stanley forecast a recession for the next 12 months at around 35 percent. Earlier in 2022, Dimon asked investors to brace for an economic “hurricane” and JPMorgan, the biggest U.S. investment bank, suspended share buybacks in July after missing Wall Street quarterly expectations.