Bank of America Analysts Predict a Full-Blown Global Recession Is on the Way Soon
Key takeaways
- Bank of America has 12 different data sets suggesting a global recession is imminent
- Fresh warnings came from Bank of America analysts last week that the stock market could slide in the face of a recession
- Also warned that the markets shouldn’t be too optimistic that the Fed is done raising interest rates with inflation still high
According to one of the biggest banks, the Bank of America, we’re tilting towards a recession despite the Fed’s hopes of a ‘soft landing’ to bring down inflation. And they didn’t just pull that out based on a bad feeling — they’ve got 12 different data sets to prove it. Let’s get into the details.
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What’s the Bank of America saying?
The Bank of America has made its feelings pretty clear: a recession is either here or about to hit, and they have overwhelming evidence to support the claim. Here are some of the more pertinent points:
- The ISM Manufacturing PMI has slowly been declining since last year; once it hits 45, it’s a solid indicator that a recession will come
- Its model forecasted a 16% year-on-year decline in global earnings by August
- The Treasury bonds have a pretty deep inverted yield curve, which is usually a telltale sign of a recession
- Global house prices are falling in Sweden, Australia, the U.K. and New Zealand while the U.S. remains flat
- An upcoming credit crunch thanks to lenders tightening their criteria will hurt consumers, businesses and the jobs market
So they weren’t dishing out good news, but so far the Bank of America’s predictions are holding largely true since they were published.
What does it mean for investors?
Historically, stocks and recessions aren’t besties. The Bank of America thinks investors at the moment are “too optimistic on rate cuts and not pessimistic enough on recession” and that there was “plenty of room for more S&P 500 downside”.
Not to mention the Bank of America doesn’t think the tech industry’s rally can be sustained with what’s happening in the economy. In a research note on Friday, strategist Michael Hartnett said that he anticipates a “recession to crack credit and tech as in ‘08,” also known as the last major financial crisis the world saw.
He also warned that markets shouldn’t bank on the Fed pausing rate hikes in June or the future, as inflation was still over double the 2% target.
The bottom line
We won’t lie; it’s a pretty depressing outlook — but knowledge is power, so you can start preparing now for the downturn. A diversified portfolio and long-term approach is always a good idea when the economy looks patchy.
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