- Some Wall Street heavyweights are not yet ready to rule out a recession in the United States.
- They include JPMorgan's Jamie Dimon, Goldman's David Solomon and DoubleLine's Jeffrey Gundlach.
- Their concerns include cash-strapped consumers, a softening job market and a fiscal hangover.
Recession fears have waned this year as the U.S. economy remained strong, stock prices rose to record highs and the Federal Reserve signaled it could start cutting interest rates in the coming months.
But some top executives, economists and investors still have reason to be concerned and are not yet ready to rule out the possibility of a hard landing.
Below is a summary of recent recession warnings from six experts.
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Jamie Dimon, CEO of JPMorgan Chase
There's a long history of investors being caught off guard by sudden economic downturns, Dimon told CNBC this week.
“I was feeling great before the crash, but things still change,” said the billionaire bank president.
Dimon said the U.S. economy may still be on a cloud of aggressive government spending, and interest rates could rise further.
The market is pricing in “a 70% or 80% chance of a soft landing,” he said, “but I think it's half that.”
Dimon emphasized that the full effects of fiscal stimulus, quantitative tightening, budget deficits and geopolitical turmoil will not be felt for years.
“I'm cautious about everything,” he said, adding that a recession could rattle weaker banks and hurt the private credit and real estate sectors.
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David Solomon, CEO of Goldman Sachs
“The world is poised for a soft landing,” Solomon said at this week's UBS conference. “My own view is that it's a little more uncertain.”
The investment banking giant said wars between Russia and Ukraine and Israel and Hamas were likely to cause inflation and be a “headwind to global growth.”
Solomon added that multiple business leaders have said that spending is down among low-income consumers and parts of the economy are “softening a little bit.”
He nods to the fact that the resilience of consumer spending has so far helped the economy avoid recession, but with household budgets under pressure from both inflation and rising borrowing costs, the boom in buying may not last long. There are growing concerns that this will not continue.
3. Ellen Zentner, Morgan Stanley US Chief Economist
The U.S. may avoid a recession this year, but it's certain to hit one at some point, Zentner told CNBC.
“We're going to have a hard landing at some point, I guarantee you that,” the veteran economist said.
Zentner emphasized that the effects of rising interest rates and the shrinking of the Fed's balance sheet have been delayed.
“The full effects of monetary policy tightening have not yet been confirmed,” he said.
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Steve Hanke, Johns Hopkins University Professor
Hanke told Business Insider this week that if history is any indication, the U.S. economy is headed for a recession.
The applied economics professor has warned that the US money supply has contracted by 4.5% since March 2022.
“There have only been four sustained contractions in the U.S. money supply, and each time was followed by a recession,” he said.
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Paul Dietrich, Chief Investment Strategist, B. Riley Wealth Management
“We're still on the road to recession,” Dietrich told Business Insider in a recent interview. “No one seems to realize that the economy is cooling and there are risks to the economy everywhere.”
He said several economic indicators were moving into “deep recession territory.” Dietrich said people are out of work for longer periods of time and have record amounts of credit card debt, meaning consumers could soon reach their credit limits and be forced to stop spending. .
Dietrich also predicted it would be an uphill battle to bring inflation down to the Fed's 2% goal and warned of the risk of 1970s-style stagflation.
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Jeffrey Gundlach, DoubleLine Capital CEO
“I think we're closer to a recession than most people think,” Gundlach said in a recent YouTube video. “I think that will happen by 2025.”
Gundlach said the U.S. economy appears to be softening, with “many early indicators pointing toward a recession.”
The billionaire fund manager pointed to recent labor market data showing fewer hours worked, longer periods of unemployment and higher unemployment rates in some states.
Gundlach also predicted that the next recession would trigger “very extreme” fiscal and monetary responses, causing the federal deficit to soar and weighing on the dollar.
“It's going to be a very, very bad economic and fiscal situation, and that will accelerate the trend towards another reserve currency,” he said.
