Michael O'Donnell’s Post

Economist Warns of Hard Landing: Is the U.S. Economy in Trouble? Last year, experts predicted a recession for the U.S. economy, but it defied expectations. Now, the consensus is that we’ll experience a soft landing—a slowdown without a full-blown recession. However, Citi’s chief U.S. economist, Andrew Hollenhorst, disagrees. He foresees a hard landing, with inflation and labor market weakness leading the Federal Reserve to make four rate cuts this year—more than Wall Street anticipates. Recent data on job growth and consumer sentiment support his view. As financial markets waver, the question remains: Is the U.S. economy heading for a rough landing? https://lnkd.in/e7SaSmkP

US economy beats growth expectations in second quarter

The Federal Reserve finally cut interest rates as the economy continued to cool. The labor market remains healthy, and inflation is tamed but not completely vanquished. As we enter the final weeks of the campaign season, there is much uncertainty, but the economy is still solid, and a soft landing remains our base case. We discuss all of this and more in our Q4 Market & Economic Outlook. https://lnkd.in/gJEySGKD

There’s a sense of cautious optimism in the air. The cooling inflation, coupled with steady consumer spending, is creating a “Goldilocks” scenario—where the economy is neither too hot nor too cold. This could mean we’re in for a smoother economic ride in the near future. I, on the other hand, am not completely convinced. Inflation maybe “cooling” but prices compared to 2020 are still astronomical and wages are not keeping up. Unemployment is ticking up and job growth is stagnating. Feels like the economy is starting to peeter out and the fed appears content to reduce rates at a slow and steady clip. Not sure what your definition of a soft landing is, but I expect there to be some discomfort in the coming months. #USEconomy #Inflation #EconomicTrends #BusinessInsights

“Time has come for policy to adjust” This statement carries significant implications for the global economy. And as we head into the week, with the U.S. Federal Reserve poised to start cutting rates—likely by 25 basis points (a more aggressive cut of 50 basis points would be helpful for the labor market but could also risk reigniting inflation) —from a two-decade high of between 5.25 and 5.50 percent for the past 14 months. The question everyone’s asking is: Can this effectively avert a recession? While inflation seems to be largely under control, other red flags are waving, particularly in the U.S. labor market, where unemployment has risen to 4.2%. This paints a more complex picture for the economy and raises doubts about whether this dovish stance alone can keep the U.S. economy from sliding into a recession. Rate cuts by the Fed are typically aimed at stimulating the economy by lowering borrowing costs, which in turn encourages consumer spending and business investment. This should, in theory, boost demand, stabilize growth, and avoid the downward spiral of a recession. However, the current economic landscape calls for a deeper dive into how effective these cuts may be in practice. Despite efforts to curb inflation, the U.S. labor market has softened, with a steady rise in unemployment this year. While still not alarming, the trend signals that businesses are becoming more cautious, potentially reducing hiring and investment. The upcoming payroll data will be crucial in assessing whether the economy is resilient enough to sustain itself without the need for aggressive monetary policy. However, the Emerging Markets, mainly India and Brazil stand to benefit from this rate cut through: - Increased capital inflows. - Currency appreciation - Increasing stock prices But it is still important to temper expectations. While rate cuts can provide a liquidity boost and potentially stave off an immediate downturn, long-term stability depends on more than just monetary policy. The U.S. labor market, consumer confidence, and global economic conditions will all play a role in determining whether the economy can avoid a full-fledged recession. Stock markets typically respond favorably to rate cuts as they lower the cost of capital and improve company profitability. However, in the past, the equity boost that many expected has been late to materialize. With valuations in the Indian markets already stretched in several sectors, the question remains whether these rate cuts will be enough to drive further upward momentum or whether markets are already pricing in the benefits. Your opinions are welcome. #Fedratecut #Economics

The U.S. economy is showing resilience despite concerns of a potential recession. While the Federal Reserve’s bold rate cut has helped ease fears, economists still see a 33% chance of a downturn. But with consumer spending remaining strong and job creation steady, the outlook suggests a soft landing rather than a sharp decline. Read on here: https://ow.ly/TCpY50TKMX3

Will we have a recession in 2025? Although nobody has a crystal ball, the consensus seems to be that the economy will continue to expand in 2025, albeit at a slower rate of growth than it did this year. SIFMA says nearly half of roundtable members believe the odds of a recession in 2025 to be 15% or less, while another third estimate that the likelihood of a recession is between 15% and 30%. Here are what some individual financial experts have predicted recently about the 2025 economy. https://bit.ly/3BPSQub

From Ali Donaldson at Inc. Magazine, Economists are confident the U.S. will avoid a recession in 2024, with 90% predicting a "soft landing" and stronger growth. The GDP growth forecast for 2024 has been raised to 2.4%. However, inflation is expected to continue, leading to interest rates remaining elevated. The Fed is anticipated to delay rate cuts, posing a downside risk due to tight monetary policy. Potential upsides include improved productivity and lower inflation, however I am not sure what will happen in the housing market, which fuels big ticket spending. Any thoughts??? #economy, #inflation, #GDP

I found an insightful article in Financial Times on how the US economy is holding strong as the presidential election approaches. My top takeaways: ⭐ US GDP grew by 2.8% in Q3, just below expectations, showcasing consumer strength despite inflation. ⭐⭐ Consumer spending accelerated to 3.7%, while private-sector job growth added 233,000 roles in October, signalling continued economic stability. ⭐⭐⭐ Economists are hopeful for a “soft landing,” with the Fed’s recent rate cuts and a healthy job market helping ease inflation without major job losses. This article explores how the US economy is surpassing other major economies, driven by consumer confidence and a resilient job market. Definitely worth a read!