Economists have been forecasting a US recession would happen since the Federal Reserve (Fed) started raising interest rates back in March 2022. The federal funds rate has risen almost 500 basis points since last year, as the Fed has aggressively attacked inflation.
J. Patrick Bradley, Senior Vice President – Investment Research at Brandywine Global, part of Franklin Templeton says:
“On the other side of the coin, there is a sizable contingent who still assert that a soft landing remains possible.
“I am not in that camp. The exact timing of when a potential recession might begin is lacking, but a fledgling U.S. banking crisis may have shortened the timetable. Let us look at where we are in the business cycle and see if there are any recessionary signals.
“Most likely, in my view, a recession is baked in now. The U.S. has just experienced three regional bank failures. The failures of Silicon Valley Bank and Signature Bank saw a surge in discount window borrowing. Next, First Republic Bank became the latest bank to fail, earning the dubious distinction of being the second-largest bank failure in U.S. history. Now, other struggling banks, hoping to avoid the same fate, are actively seeking suitors. This turmoil and uncertainty will ripple through the economy just as the steadfast tightening of U.S. monetary policy is also manifesting in financial conditions."
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