The US economy’s prospects in 2024 are debated among experts, with some predicting a recession due to high interest rates and worsening economic conditions, while others believe the US will experience a slowdown but avoid a recession.
The rise in unemployment to 3.9% last month has raised concerns, as it approaches the triggering point of the Sahm Rule, a renowned predictor of recessions. Claudia Sahm, the creator of this rule, explains that despite the increase in joblessness, the rule has not been triggered yet. While reliable, she hopes to see it break as a sign of economic stability.
Experts are warning of an impending wave of corporate defaults and bankruptcies that could have significant consequences for the economy. High interest rates are taking a toll on businesses and consumers, increasing the chances of a recession. The number of bankruptcy filings has already surpassed previous years’ totals, and corporate debt defaults are on the rise globally. This trend is putting considerable strain on corporate balance sheets and is particularly challenging for so-called zombie firms. Charles Schwab predicts that the wave of distress will continue and reach its peak by the first quarter of 2024. This wave of defaults and bankruptcies, combined with other warning signs, such as consumers running out of savings, the resumption of student loan payments, and surging bond yields, is raising concerns about a slowdown in the economy.
Renowned investor Jeff Gundlach warns of an approaching recession as bond yields soar. The narrowing spread between 2-year and 10-year US Treasury yields indicates a severe economic downturn. Gundlach highlights the de-inversion of the US Treasury yield curve as a cause for concern, urging people to be on high alert for a recession. Other experts, including David Lebovitz from JPMorgan Asset Management, share these concerns and predict potential risks in the bond market sell-off.