As stated previously in our part 1 post, US firms would face difficulties raising funds because of the higher risk premiums. These difficulties are reflected now by a significant fall in corporate debts.
We had also stated previously that there would be earnings downgrades soon.
This chart indicates that there is a high probability of low corporate earnings in 2022.
A recent poll shows that more than 70% believe the US will be in a recession by year end (2022).
Furthermore, US consumers are already complaining about the recession.
Notwithstanding the US recession, the EU will also be in a recession because of its own economic weaknesses.
Is a recession really coming?
Well, the US 10-2 year yield curve inversion has happened again! A yield curve inversion will usually precede a recession.
As the US Fed continues to hike its rates to control the sky-high inflation, the bubbly housing market looks set to burst. We had indicated in Part 1 that the US housing market was already in a bubble as indicated by the chart below.
Here are the recent comments on the US housing market.
Morgan Stanley (MS) had stated that the US growth was worse than expected. How valid was the MS statement?
As close to 70% of the US GDP is supported by consumers, any slowdown in consumers' economic activity will impact the US GDP significantly. The most important deciding factor will be the consumers' wages. The US disposal incomes and real wages have been declining despite the rising salaries. Consequently, this means that their current spending can't be sustainable in the future.
No wonder the consumers are feeling miserable now as indicated by the misery index.
In conclusion, all the above-mentioned factors will push the US into a recession.
