Although the United States stock market has shown resilience recently following the November election, a Wall Street analyst is warning that this momentum may be masking a far more concerning issue.
According to Gordon Johnson, founder of the financial research analysis platform GLJ Research, the economy may already be in, or teetering on the edge of, a recession despite the bullish stock market, he said in an X post on December 17.
Beneath the surface, he observed that the labor market data reveals troubling trends that often precede economic downturns.
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Historical analysis shows that a recession follows when the U.S. unemployment rate rises above its 36-month moving average (MAV).
This pattern has preceded every major recession since 1951. The current trend suggests a similar trajectory, raising concerns of an imminent economic contraction.
“The US economy is likely already in, or on the brink of, recession. The U.S. stock market’s strength is masking this reality; but, the jobs data shows the reality of it all. This will likely become clear to the masses 3-to-4 months into Trump’s term,” he said.
Johnson suggested that the early months of Donald Trump’s presidency could highlight the economic struggles of average Americans. While his election reflected widespread dissatisfaction and a desire for change, rising prices, stagnating wages, and growing wealth inequality remain key challenges.
Fed’s role in stopping a recession
On the other hand, the financial commentary platform The Kobeissi Letter has provided further insights into potential recession concerns. In a December 16 post, the entity observed that the S&P 500 has surged by 9% since the Federal Reserve began cutting interest rates in September.
This move has sparked speculation about the likelihood of a ‘soft landing’ for the U.S. economy.
Historically, during previous rate-cut cycles where a recession was avoided, the S&P 500 saw modest gains of around 3% by this point. In contrast, when the U.S. economy entered a recession, the index typically experienced a decline of about 3%.
Currently, the market is performing notably better. The recent gains suggest that investors are increasingly confident that the Fed’s aggressive rate cuts will stave off a recession and guide the economy toward a more stable period.
However, the question remains: Has the Fed avoided a recession? Interestingly, as reported by Finbold, economist Henrik Zeberg, who maintains that the economy is set to experience the worst crash in history, has noted that the Fed is late in saving the economy.
“Fed will come to the rescue – but they are already way too late. Geniuses are looking at “inflation”, which is a lagging indicator in the Business Cycle. <…>. Largest Crash since 1929 ahead!,” he said.
A similar grim outlook is shared by celebrity investor and author Robert Kiyosaki, who has maintained that the Federal Reserve has little power to rescue the economy while recommending investment in gold, silver, and Bitcoin (BTC).
Waning recession sentiment
Meanwhile, some investors have lowered expectations of a possible economic headwind, with the stock market recently notching higher. For instance, a Bank of America (BofA) Global Fund Manager Survey in October showed that most global investors do not anticipate a hard landing in the coming 12 months.
Following stronger-than-expected September U.S. employment data, Goldman Sachs (NYSE: GS) lowered its recession forecast from 20% to 15%. Non-farm payrolls surged to 254,000, beating the 150,000 estimate, while unemployment dropped to 4.1%.
Chief economist Jan Hatzius cited robust job vacancies and GDP growth as signs that the job market remains strong. Previously, Goldman had raised recession risks to 25% in August but revised it back to 20% due to resilient labor and retail data at the time.
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