United States recession probability sharply rises in 2024

The United States economy is facing an increased possibility of a recession, with key indicators flashing warning signals.

In particular, the Conference Board Leading Economic Index (LEI), a predictor of economic trends, has dropped to levels unseen since the 2020 pandemic, according to data shared by Global Markets Investor on November 22.

The LEI has now fallen for 32 consecutive months, and such prolonged declines have only occurred during significant economic recessions over the past 65 years. 

The index aggregates ten critical economic components and tracks manufacturing orders, consumer expectations, and financial market conditions.

Interestingly, LEI’s current level is lower than during the 2020 pandemic. This suggests that economic momentum has weakened, potentially due to tightening monetary policy, sluggish business activity, and deteriorating consumer sentiment.

Recession concerns despite bullish stock market

The recession concerns have resurfaced despite the U.S. stock market surging after Donald Trump’s victory. In this context, Trump is considered bullish for the economy, but key market players warn that a crash is imminent.

For example, Black Swan investor Mark Spitznagel predicted that stocks could lose over half their value in a sell-off by year-end, drawing parallels to the dot-com bubble of 2000.

Despite the current rally fueled by cooling inflation and easing Federal Reserve policies, he cited the government’s $34 trillion debt as a key recession risk. 

Spitznagel warned that the rally may lead to a severe market downturn. Notably, he has been cautioning of a recession since early 2023.

Regarding the stock market signal, economist Henrik Zeberg has maintained that investors should expect a rally in the S&P 500 index and cryptocurrencies before a major crash. Already, the index’s technical set-up is signaling a possible incoming crash. 

Probability of a recession 

Additionally, in August, J.P. Morgan Research maintained a 45% probability of a recession by the end of 2025 but acknowledged that the situation might change in light of political developments.

In the same breath, back in October, Finbold reported that Goldman Sachs revised the probability of a recession in the next year from 20% to the long-term average of 15%, citing robust GDP growth.

Initially, the bank raised its recession forecast to 25% in August, following concerns about economic softness, before reducing it to 20% due to a resilient labor market and strong retail data.

On the other hand, analyst Paul Dietrich also warned of an impending crash, citing high P/E ratios, low dividend yields, and an over-concentration of enthusiasm in a few stocks as signs of instability.

He predicted that the coming crash could be worse than the 2008 financial crisis and the dot-com bust due to factors like ballooning national debt.

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