Will the recession upset the markets or…-proiezionidiborsa.it
Many believe that the rate hike in recent months will likely lead to an economic recession in the coming months. Will it be like this, or do some elements row against this hypothesis? What do the macroeconomic indicators say? What are the aspects that should not be underestimated and why. A simple analysis of the situation.
Will the recession engulf markets in 2023? In the past months the Central banks after years of low or negative interest rates, they have started to raise the cost of borrowing. At the last meeting of the Federal Reserve and the ECB, both Powell and Lagarde left the door open for new ones rate hikes, and also speculated “a soft landing of the economy in the coming months”. Typically an economic cycle fluctuates between low rates/recessiongradually high rates/economic expansion. History says that high rates do not automatically lead to a recession. In fact, there are some aspects to be evaluated: when rates are raised, do they have a negative effect on the growth of the economy and on company profits?
Will the recession engulf markets in 2023? Probabilities
This is an important aspect. For the moment, no predictive indicator indicates a high probability that there could be an economic recession in the coming months. Perhaps a mere slowdown. Furthermore, for the moment, employment data, and other macroeconomic data, indicate that growth continues to be quite strong.
The effect of the rise in interest rates is scary-proiezionidiborsa.it
However, there is a statistical element in favor of a possible recession. In a decade the probability of a recession occurring is higher between the second and third year, and between the seventh and eighth. Recession occurs when the GDP of two consecutive quarters is negative.
From 1945 to 2029, the recession lasted an average of 10.5 months.
This case study keeps us alert, and will make us carefully evaluate the economic indicators from now on.
What did the markets do in the first 3 years of the decade?
Forecast for the decade 2021/2030-proiezionidiborsa.it
The markets tend to move before the economic cycle by at least 6/9 months, and probably the eventual recession (if any) of the next few months has already been discounted. So, in a simplistic way, we can say that the long-term low of the markets tends to form when things are still bad, but on the horizon we are starting to see a turning point, the light at the end of the tunnel.
The best however, when you start to glimpse that things could start to get worse. In the first 27 months of the decade the markets tend to form a relevant bottom.
These elements make us exist optimistic about the future of the markets, and on the possible economic trend in the coming months. We’ll see what happens then.
