Markets are again gripped by fears as analysts expect the US to slide into a recession in the fourth quarter. If this scenario comes true, the euro area and other countries will face an economic contraction. For this reason, investors are extremely concerned about such a possibility.
Economists in London were the first who voiced this problem. They are well aware of the domino effect if the US slips into a recession.
“The US will enter a downturn in the fourth quarter, followed by a year of contraction and a European recession in 2024,” HSBC Asset Management noted. The agency reckoned that recession warnings are “flashing red” for many economies, while fiscal and monetary policies are out of sync with stock and bond markets.
“The coming recession scenario will be more like the early 1990s recession, with our central scenario being a 1-2% drawdown in GDP,” Joseph Little, global chief strategist at HSBC Asset Management, pinpointed. He acknowledged that some parts of the economy had remained resilient thus far. However, the balance of risks “points to high recession risk now.” Europe is lagging behind the US but the macro trajectory is generally “aligned.”
