AP Photo/Seth Wenig
- Global growth is expected to slow but remain solid over the next year.
- But a recent string of disappointing economic data has raised concerns about the possibility of a recession.
- Trade tensions and oil prices are among key factors to keep an eye on, according to analysts.
Economies are widely expected to slow around the world this year, including in the US. While economists still forecast a solid pace of growth in the near term, a recent string of disappointing data has raised concerns about the possibility of a downturn.
Take last week: the gap between short- and long-term government bonds inverted for the first time in more than a decade. Historically, inversion of the so-called yield curve has preceded recessions.
Here’s what recession watchers should look for in the coming months, according to Societe Generale.
The trade war
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Societe Generale said a prolonged US-China trade war, which is in its eighth month and counting, would be at least in part a source of recession risk. Protectionism and the threat of further escalation are expected to continue to hurt growth.
As the Federal Reserve lowered its growth forecast for the economy last week, Chair Jerome Powell said tariffs were a “prominent concern” among business contacts.
An asset bubble bursting
Reuters
US stocks have largely bounced back after posting their worst year since the financial crisis. But equities have still been identified as overvalued on many metrics, Societe Generale analysts wrote in a research note.
“Historically, equity markets peak a little more than six months ahead of the official recession date without consideration of valuation,” the analysts said.
A geopolitical shock
AP Photo/Evan Vucci
The Federal Reserve has cited geopolitical events such as Brexit and ongoing trade tensions while dimming its outlook on the economy. The Trump administration’s foreign policy strategy with nations like North Korea could also weigh on growth, according to Societe Generale.
“A permanent concern with an immediate threat,” the analysts wrote. “President Trump’s style might raise risks, while achievements are debated.”
See the rest of the story at Business Insider
See Also:
- A Wall Street economist has uncovered a new and improved way to see a stock-market crash coming — and he warns the alarm bells are already going off
- A data point seen as the bellweather for global trade just tanked — and ‘the floor is not yet in sight’
- A chief market strategist at a $1.4 trillion investing giant reveals the hidden red flag that can signal a recession months in advance
Source: Business Insider – gheeb@businessinsider.com (Gina Heeb)