So, what are your thoughts about a recession?
The “R” word has been cropping up a lot lately as the general feeling moves away from “if” and more toward “how bad.”
A survey conducted by The Harris Poll and HarrisX from May 17-18, 2023 among 2,004 registered voters found that only 21% of respondents believe the U.S. will be able to avoid a recession.
Two-thirds of respondents believe that the economy is heading in the right direction, and the strength of the economy is perceived at below 50%.
The same poll, by the way, said Twitter owner and Tesla (TSLA) – Get Free Report CEO Elon Musk is now the most popular political figure in the United States, ahead of former President Donald Trump and current President Joe Biden.
There’s certainly been enough scary news out there. The most recent S&P data shows 2023 corporate bankruptcies rising at an alarming rate, with 236 bankruptcies recorded through the end of April 2023, while 109 were recorded over the same time period last year.
A ‘Mild Recession’ Over a Moderate One
UBS also found in a recent study that bankruptcies worth $10 million or more had a rolling average of about eight per week.
Marianne Lake, co-CEO of consumer and community banking at JPMorgan Chase (^JJQ) said the bank sees “a mild recession” in the US over a moderate one, according to Bloomberg.
JPMorgan Chase recently acquired the struggling First Republic Bank.
The company will take on $173 billion of First Republic’s loan book, regulators said, while purchasing $30 billion in securities from its balance sheet and $92 billion in deposits.
Lake, speaking at the bank’s investors day, said the outflows have slowed and that JPMorgan is working to provide the remaining former First Republic advisors clarity on their roles, Financial Planning reported.
Louise Navellier, chief investment officer of Navellier Calculated Investing, said in his May 22 newsletter that “there seems to be growing confidence that even if a mild recession comes that it won’t hit earnings nearly as hard (down 10% to 20%) as historical recessions have.”
Timing Important Question for Markets
“Perhaps this is based on the dominance of mega techs weights in the indexes and the optimism of their AI opportunity,” Navellier wrote. “Outside that short list of names, stock picking will become increasingly challenging if a recession comes.”
Deutsche Bank analyst Henry Allen said that “since at least the start of the year, a U.S. recession has been the consensus forecast among economists, including our own at DB Research. “
“Timing this is an important question for markets, since historically the S&P 500 does not usually bottom until the recession has begun,” he said. “Whilst a recession is yet to start, the amount of leading indicators pointing towards one have continued to grow this year.”
“And whilst nothing is inevitable, this cycle would need to behave very differently to all those seen before if a recession is to be avoided.”
Goldman Sachs (GS) – Get Free Report is more optimistic about the state of the economy.
Goldman’s chief economist, Jan Hatzius, wrote earlier this month that the investment bank‘s U.S. growth forecast for 2023 “remains at a well-above-consensus 1.6% and our 12-month recession probability at a well-below-consensus 35%.”
Get exclusive access to portfolio managers and their proven investing strategies with Real Money Pro. Get started now.