Majority of Large Banks Believe Economic Unrest Lies Ahead for the Rest of 2023
Jose Nino
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The overwhelming majority of economists at 23 leading financial institutions polled by The Wall Street Journal predict that the United States will experience a recession in 2023. In addition, these economists expect that millions of Americans will lose their jobs.
Per the report, over two-thirds of the nearly two dozen institutions, largely made up of trading firms and investment banks that do business directly with the Federal Reserve, expect the US economy to enter a contractionary period in 2023.
2 of the 23 firms predict that the recession will arrive in 2024. By contrast, 5 believe that the US will be able to completely avoid a recession: Credit Suisse, Goldman Sachs, HSBC, JPMorgan Chase, and Morgan Stanley.
The institutions predicting consumer spending to diminish as Americans’ savings get wiped out and the Fed puts upward pressure on borrowing costs via interest rate hikes and as banks tighten their lending standards
Rising inflation, which reached a peak of 9% in June 2022, compelled the Fed to raise interest rates at its sharpest pace since the 1980s. This inflation rate is generally calculated through the consumer price index (CPI).
Though as Tom Ozimek of the Epoch Times noted “An alternative measure of inflation that uses the same methodology as the U.S. government used to measure CPI in the 1980s puts November’s inflation figure at a much higher 15.23 percent.”
The Fed’s interest rate hikes were a rather brisk action. In March 2022, interest rates were nearly at zero. Now interest rates are hovering around 4.24% to 4.5%.
The majority of economists that the Wall Street Journal surveyed believe unemployment will worsen and peak at over 5%. SMB Law Group’s review of 2023 market outlook took the opinions of 10 leading investment banks, which showed that the majority tend to be leaning towards a pessimistic outlook on the economy.
A review of 2023 market outlook reports from 10 major investment banks by SMB Law Group shows that the majority are leaning pessimistic. One of the banks — Barclays — predicted that 2023 “will be a long, hard slog.”
SMB classified Goldman Sachs as “leaning optimistic” with a sentiment score of 6. Goldman Sachs predicted that the US will “narrowly avoid recession.”
JPMorgan received a “moderately optimistic” classification with a score of 7 on SMB’s sentiment scale. It has labeled 2023 as a “bad year for the economy” but a “better year for markets,” with a “low” risk of a “deep, housing-led recession of the type experienced in 2008. As Ozimek noted 2008 was when a “sub-prime mortgage meltdown spiraled into a broader financial crisis.”
There’s a lot of economic pessimism in the air, and it’s largely warranted due to how the political class has mismanaged the economy through non-stop government intervention and easy money. Unless elected officials scale back the size of the state, economic instability will be the norm in the US.
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