A recession akin to 1969-1970 awaits U.S. next year, economist warns

Prepare for a recession next year. That’s the word of caution from S&P Global Ratings economist Beth Ann Bovino, in a post-Thanksgiving weekend report on Monday.

‘GDP will decline by 0.8%, a mild contraction in line with the 1969/1970 recession.’


– S&P Global Ratings

Like many prognosticators inside and outside Wall Street, S&P sees the chance that the U.S. will avoid a recession as “darkening,” as the Federal Reserve continues to pursue its strategy of trying to contain inflation. of inflationary pressures by raising interest rates.

The goal of the US central bank is simple: to eliminate inflation, with measures such as the consumer-price index that put the numbers at about 8% for several months in a row.

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The Fed sees inflation for a healthy economy at 2%, and the above readings suggest that the economy is heating up.

Raising interest rates is one of the main ways the Fed can cool the economy, by making goods and services more expensive. That strategy is causing pain — and risking a recession — for consumers and investors who have enjoyed more than a decade of cheap money to buy homes, cars and other assets like stocks and bitcoin BTCUSD ,
+ 0.10%.

“While economic momentum is protecting the US economy this year, what’s around the bend in 2023 is of greater concern,” the S&P Global Ratings economist wrote.

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Creating global tensions also played a part.

“With the ongoing Russia-Ukraine conflict, tensions with Taiwan escalating, and China’s slowdown exacerbating supply-chain and price pressures, the U.S. economy appears headed for recession,” the report continued. .

Against the backdrop of a soft economy is a number of gloomy predictions for the market, including the Dow Jones Industrial Average DJIA,
-0.55%,
the S&P 500 index SPX,
-1.54%
and the Nasdaq Composite Index COMP,
-1.58%,
with Deutsche Bank recently predicting a further 25% fall for major indexes from current levels.

Deutsche Bank was also one of the first major banks to predict a US recession. But the ranks of recessionary forecasts continue to grow.

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Read:
can’t be determined

See: Why the countdown to a recession starts now, according to these bond market signals

Fortunately, perhaps, there are positives to be taken from the predictions for a 1969-1970 style recession. Remarkably, that recession has been relatively quiet. Also initiated by an inflationary crisis, it began in December of ’69 and lasted 11 months, according to the National Bureau of Economic Research, which is considered the arbiter of the US for making recession calls.

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