recession pushed to 2024 michael w hart insurance

Recession Pushed to 2024?

Economic experts, investors, and the Federal Reserve have been warning for the past year or so that a recession is coming. A recession is an economic downturn characterized by a significant and sustained decline in economic activity throughout the country. Recessions can be caused by various factors, including financial crises, external shocks (such as natural disasters or geopolitical events), high inflation, or imbalances in the economy (e.g., excessive debt or overvalued assets).

The Treasury market first began showing signs that a U.S. recession lurks on the horizon almost a year ago, in late October of 2022. This happened when the Fed started its aggressive interest rate hikes to tame high inflation. Although it was thought to be inevitable for 2023, the U.S. economy has so far avoided it.

So, where is this long-anticipated recession? Well, the economy has proved itself more resilient than expected, and the case for a 2023 recession is crumbling. But, just because we’ve pushed it further down the road doesn’t mean it’s not coming: Many economists still think a downturn is likely on the horizon. However, many experts have pushed their predictions out to later, now saying it could arrive next year, in July or August of 2024. How likely is this?

How Likely Is a 2024 Recession?

There’s a reason it’s so hard to predict when exactly a recession will happen: there’s a lag between the Federal Reserve’s rate hikes, and when they actually start to take effect. According to Chair of the Federal Reserve Jerome Powell, the Fed’s recent rate hikes will take “a year and change” to make an impact. It’s been over a year since the rate-hiking cycle began, which means they might fully take hold soon.

According to a poll of economic experts,* 78% of them predicted that the chance of an upcoming recession is higher than 50%. From there, 28% predicted that the odds are higher than 70%. This shows probable odds that an economic downturn is on the horizon. However, economists are mostly in agreement that the projected recession is unlikely to be as severe as the one that came with the pandemic, a drip that pushed unemployment up to double-digit levels. Goldman Sachs economists, meanwhile, pegged the odds of a recession in the next 12 months at just 15%, meaning that to them at least there isn’t a pressing danger of one. But, what about a 2024 recession?

Then there’s what’s been indicated by the yield curve. Proven in the past to be a reliable indicator of a downturn, an inverted yield curve shows that long-term interest rates are less than short-term interest rates. Following an inverted yield curve, a recession takes an average of 589 days to materialize, according to data collected since the late 1960s. It’s tempting to dismiss this cycle’s yield curve, but history has shown us that recessions haven’t actually been quick to arrive after the yield curve first inverts.

A Recession Could Still Be Coming

Recessions are an ordinary, accepted occurrence in the business cycle that everyone knows has to occasionally happen. And, few downturns seemed as easy to predict as the one that came in the aftermath of the Coronavirus pandemic. But now, the Federal Reserve has raised interest rates to levels not matched since 2007, and has done so at a pace not seen since the 1980s. The Fed has never been able to raise interest rates this far and fast before without prompting a downturn. And, historically, the Fed has never been able to cool down excess inflation before without causing one. But, to the surprise of most economists, a recession still hasn’t happened. A few different factors have delayed the onset of a recession during this year. These include:

  • The Social Security cost-of-living adjustment in January
  • The loosening of financial conditions in stocks and bank liquidity after the March banking crisis
  • The residual resilience of the labor market
  • The restarting of China’s economy

We could, however, still be on the path toward a U.S. recession some time next year. For sure, the economy has slowed down after its big “reopening” following the pandemic. Banks have also tightened their lending standards in the wake of the three major failures earlier this year. But consumers have continued spending, and the labor market is still going.

Reach Out to Us

In today’s economy, concerns about a possible recession plague the minds of many. Are you worried about the possibility of a downturn? While you can’t predict the future, you can take certain steps to prepare for it. Reach out to Michael W. Hart Insurance Agency. We can make recommendations, and help you find ways to safeguard your financial future. Your financial goals are unique, and so too should your strategy. We tailor our recommendations to your specific needs: You need to have a solid financial strategy in place, to keep you protected regardless of what happens in the future.

We can help you understand your risk tolerance, so you can implement strategies to hopefully minimize losses. We’re here to help you get educated, and make the right decisions to protect your wealth. Contact us today to attend an educational seminar or book a no-obligation, one-on-one meeting with us. We may be able to help you craft a financial strategy to offer you comfort, even in uncertain times like these.

*Sources: MarketWatch, Bankrate, CNN Business.

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