economic downturns, stock market downturns, and housing market downturns. As of December 19 (The Newport Beach Independent):
- Recession: The US is likely to enter a recession, where consumers are expected to drain their savings, resulting in only one quarter of GDP likely to be positive by 2024.
- Corporate Downsizing and Unemployment: Expected corporate downsizing may increase unemployment rates, although they are expected to remain below 5%.
- Federal Reserve Policy: The Fed may raise interest rates by another 25 basis points but will likely begin lowering rates in mid-2024, with a reduction of no more than 75 basis points unless a global crisis occurs.
- Stock Market and Bond Market: The stock market is expected to sell off by 15% over the next six months, followed by a moderate rally when the devaluation begins. The bond market, after three consecutive years of decline, is expected to grow well in 2024.
- Housing Market: Housing prices may drop by up to 10%, but limited inventory should provide some stability.
- Real Estate: CRE prices are expected to continue to decline, and multifamily properties may underperform after a decade of strong performance.
As I noted yesterday, the median Survey of Professional Forecasters is not a quarter of negative growth, and the current stream is for positive growth in Q2.
Figure 1: GDP (bold black), May SPF median (light blue), GDPNow of 5/16 (blue square), New York Fed nowcast of 5/17 (green triangle), St. Louis Fed nowcast of 5/17 (tan square) , all in bn.Ch.2017$, SAAR. Source: BEA 2024Q1 advance, Philadelphia Fed, Atlanta Fed, NY Fed, St. Louis Fed by FRED, and author figures.
Therefore, the first prediction seems impossible.
Regarding unemployment, unemployment is predicted by SPF to rise, but away less than 5%.
Figure 2: Unemployment rate (bold black), and average May SPF forecast (blue), both in %. Source: BLS, Philadelphia Fed.
How about a 15% selloff? It is unclear where the 15% comes from; I think the level is in December of 2023. Here is the forecast for the S&P500 and what the S&P500 needs to be in June to match Hovde’s forecast.
Figure 3: The S&P500 (bold black), and Hovde’s projection (red square). May observations until May 16. Source: FRED, and author’s calculations.
Finally, what about the housing market? The 10% drop in price is for 2024, so I think the 10% drop is off the December level.
Figure 4: S&P Case Shiller 20 City home price index, sa (bold black), and Hovde’s forecast (red square). Source: FRED and author’s calculations.
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