August 10, 2022
If it looks and sounds like a recession, then it probably is

Is the United States on the verge of a financial crisis? Are we now in the middle of a recession? Even if it doesn’t, it doesn’t really matter.

Many people in the United States are already experiencing the effects of what they perceive to be a recession. The rising cost of just about everything makes it more difficult to keep up with monthly obligations and basic living needs. This year’s stock market has been a complete wreck. There has been a decline in home sales. Consumer confidence is at an all-time low at this time.

According to a recent Morning Consult/Politico poll, 65 percent of US voters believe we are currently in a recession, compared to just 51 percent saying the same thing in March 2020, when the Covid epidemic began and the beginning of the last recession occurred.

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More than half of the respondents to a recent Boston Consulting Group survey expect a US recession to begin within the next 12 months, and over 80 percent expect it to begin within the next year.

These figures could be just as important as actual data on employment growth and the overall economy, if not more so, if you believe that perception is reality.

It’s becoming more common knowledge that we are currently in a recession or that one will be upon us sooner rather than later, according to Boston Consulting Group partner and associate director Hady Farag.

To strike a balance between aggressive rate hikes and concerns that too much tightening could damage growth, the Federal Reserve will need to put inflation anxieties in the back of its mind..

Expect another three-quarters of a percentage point rise in interest rates from the Federal Reserve this month, just like it did in June.

One way out of this inflationary climate is for central banks to initiate this recession, according to Mabrouk Chetouane, head of global market strategy at Natixis Investment Managers Solutions in a recent research.

As a result, investors and policymakers alike must brace themselves for the impending slump, which already appears to be under way.

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Investors are watching the second-quarter GDP report with bated breath after the first-quarter contraction in the US economy.

As a general rule, two consecutive quarters with negative statistics is considered to be a recession.

Traditionally, economic downturns have been officially declared by the National Bureau of Economic Research (NBER), which has waited several months before issuing a conclusion.

For Treasury Secretary Janet Yellen, recession means a “widespread decline in the economy that affects many sectors.” She added that the NBER’s conclusion that the economy is currently experiencing a recession would “amaze” her.

You should expect to see a lot of headlines and political debate this week if the second-quarter GDP report is negative.

There are many different kinds of recessions

“We don’t expect a recession to be the norm. We expect the economy to slow significantly but avoid a recession in 2022, as we previously predicted “said Katie Nixon, Northern Trust Wealth Management’s chief investment officer, in a recent study. She did, however, add that “the technical definition of recession may be reached” as she concluded.

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A recession may not last as long or be as painful as previous ones, according to Boston Consulting Group’s Farag. Even if the economy has already entered recession mode, Investors don’t appear to be expecting another Great Recession like 2008, he said.

“No two economic downturns are alike. As far as I can tell, most people aren’t too worried about a severe economic downturn or stagnation “he stated.

In the event of a recession, the Federal Reserve may immediately reverse course and begin slashing interest rates again in an effort to resuscitate the economy.

What happened in 1999 and early 2000 was exactly what the central bank did after a series of rate rises. However, the Fed cut interest rates 11 times in 2001 as the economy fell into recession.

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