America is at greater risk of falling into an economic recession, according to one of the country’s largest lenders.
Bank of America says the United States has a greater than 30 per cent chance of seeing a recession sometime within the next year,
‘Our official model has the probability of a recession over the next 12 months only pegged at about 20 per cent, but our subjective call based on the slew of data and events leads us to believe it is closer to a 1-in-3 chance,’ Bank of America’s head of U.S. economics Michelle Meyer informed clients on Friday.
The markets continue to be concerned over prolonged trade tensions with
The stock market reported sharp losses on Monday as economists warn of an increased risk of a recession in the coming year. The image above shows trader Thomas Lee on the floor of the New York Stock Exchange on Monday
The Dow Jones Industrial Average fell 389 points, or 1.48 per cent, to 25,897.71
There are also worrying signs of a global economic slowdown, with major economies reporting downturns.
Bank of America is not the only financial giant to warn of a possible recession.
Goldman Sachs Group Inc said on Sunday that fears of the U.S.-China trade war leading to a recession are increasing and that Goldman no longer expects a trade deal between the world’s two largest economies before the 2020 U.S. presidential election.
‘We expect tariffs targeting the remaining $300billion of US imports from China to go into effect,’ the bank said in a note sent to clients.
President Trump announced on August 1 that he would impose a 10 per cent tariff on a final $300billion worth of Chinese imports on September 1, prompting China to halt purchases of U.S. agricultural products.
The United States also declared China a currency manipulator. China denies that it has manipulated the yuan for competitive gain.
The year-long trade dispute has revolved around issues such as tariffs, subsidies, technology, intellectual property and cyber security, among others.
Goldman Sachs said it lowered its fourth-quarter U.S. growth forecast by 20 basis points to 1.8 per cent on a larger than expected impact from the developments in the trade tensions.
‘Overall, we have increased our estimate of the growth impact of the trade war,’ the bank said in the note authored by three of its economists, Jan Hatzius, Alec Phillips and David Mericle.
Rising input costs from the supply chain disruption could lead U.S. companies to reduce their domestic activity, the note said.
The ongoing trade dispute with China is cited as a factor roiling markets. President Trump is seen left with Chinese President Xi Jinping (right) in Beijing in November 2017
Such ‘policy uncertainty’ may also make companies lower their capex spending, the economists added.
All three major U.S. stock indexes closed sharply lower on Monday in light trading, with little to soothe market jitters over Hong Kong protests, Argentine President Mauricio Macri’s primary election defeat, and the U.S.-China tariff dispute that has rattled markets for months.
‘The stock market’s selling off because the bond market is rallying like crazy,’ said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago.
‘There’s a flight to safety and there are multiple silos of political uncertainty.’
The Dow Jones Industrial Average fell 389 points, or 1.48 per cent, to 25,897.71, the S&P 500 lost 35.96 points, or 1.23 per cent, to 2,882.69 and the Nasdaq Composite dropped 95.73 points, or 1.2 per cent, to 7,863.41.
All 11 major sectors of the S&P 500 ended the session in negative territory, with financials, materials, energy and consumer discretionary suffering the largest percentage drops.