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Caution: 2024 recession risk ‘extremely high,’ comparable to 1980s

Caution: 2024 recession risk ‘extremely high,’ comparable to 1980s
Ana Zirojevic

Amid the continuously darkening economic outlook, the probability of a recession in the United States for the following year is extremely high, reminiscent of the levels in the 1980s when this indicator reached the heights of around 90%-95% for several years.

Indeed, the recession probability based on the 10-year/3-month term spread is exceptionally high – the highest since the early 1980s, according to the analysis by the pseudonymous finance and economy expert Game of Trades shared on August 9.

US recession probability. Source: Game of Trades

On top of that, as the analyst explained in an earlier post on X (formerly Twitter), “banks have continued to tighten lending standards,” indicative of a recession due to the historical trends that demonstrate that the big rise in banks’ tightening has “systematically led to a recession since 1990.”

Bankslending standards. Source: Game of Trades

Warnings mount

In late May, Bloomberg’s senior commodities expert Mike McGlone warned that the likelihood of a recession in the US economy had grown, sharing his views later in June when he also added that the coming slump could be one of the “worst economic resets of our lifetimes,” as Finbold reported on June 20.

More recently, in early July, professor of Applied Economics at Johns Hopkins University Steve Hanke stressed that a recession could strike as early as the first quarter of 2024, noting that the current trend of the money supply, which had been dropping significantly since July 2022, pointed at a looming downturn.

At the same time, the recession’s effects could spread to some of the more non-traditional markets, including the crypto sector, particularly its largest asset – Bitcoin (BTC) – which McGlone noted currently shows higher risk than that of the Dow Jones Industrial Average (DJIA), which could have bearish implications due to its relationship with the stock market.

Meanwhile, the US is far from alone in its recession fears. The Bank of England’s (BoE) efforts to rein in soaring inflation might actually lead the United Kingdom into a recession by the end of 2023, according to an analysis by economists Dan Hanson and Ana Andrade, who in late June noted that the UK’s inflation rate was seriously close to the double-digit figure.

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