One day after President Biden said a recession wasn't "inevitable," top corporate executives, economists, and bankers spoke at the second annual Qatar Economic Forum. They were overly pessimistic about the macroeconomic backdrop in the U.S. and cautioned about increasing recession risk.
Tesla CEO Elon Musk to economist Nouriel Roubini (nicknamed "Dr. Doom" for his bearish views) to Atlas Merchant Capital's Bob Diamond, and StanChart's Bill Winters all pointed out the economic storm clouds were gathering, and a downturn was almost unavoidable.
Starting the conversations, Musk told Bloomberg News Editor-in-Chief John Micklethwait, "a recession is inevitable at some point, as to whether there is a recession in the near term, that is more likely than not." In recent weeks, Musk tweeted it would be "beneficial" for the U.S. to go into recession because "some bankruptcies need to happen." Going into the economic conference, the world's richest man has been vocal about a downshift in the economy.
Tesla CEO @elonmusk says "a recession is inevitable at some point."— Bloomberg TV (@BloombergTV) June 21, 2022
He spoke to Bloomberg's Editor-in-Chief John Micklethwait in a wide ranging interview covering crypto, Trump and his aims for Twitter #QatarEconomicForumhttps://t.co/frZzx7EnPa pic.twitter.com/ErJNmspB8R
Roubini was more specific on his recession call, forecasting one before the end of the year. He said, "we're getting very close," and noted consumer confidence, retail sales, manufacturing activity, and housing are experiencing growth slowdowns amid high inflation.
He said the stock market generally declines 35% during recessions and is halved in stagflationary periods -- adding that the bloodbath in the bond market might not be over as U.S. 10-year Treasury yield could go "well above 4%."
"We have a situation similar to the ‘70s: excessive aggregate demand and negative supply shocks," says Roubini Macro Associates CEO @Nouriel https://t.co/WoZPXnbPp1 #QatarEconomicForum #منتدى_قطر_الاقتصادي pic.twitter.com/bDES1U04vl— Bloomberg Live (@BloombergLive) June 21, 2022
Atlas' Diamond was another vocal bear, saying it's "almost unavoidable" to avoid recession. He said the economy is slowing, and the Federal Reserve should continue aggressive monetary tightening to rein in high inflation. The latest 75bps rate hike by the Fed was the "correct move," he added, indicating another 75bps is on deck for July.
"The more the Fed acts now, the more likely it is to be quick or short, not deep and longer," Diamond said.
StanChart's Winters said, "You've got to think that the odds are that there's going to be a recession ... I think this inflation is quite bad, it's intransigent, it's not transitory, and the consequences will be a recession."
He said the downturn will last "a couple of quarters" and "there's a silver lining which is that the financial system is strong, and when you have a downturn in an economic cycle with a strong financial system, it tends not to be amplified -- a weak financial system it gets amplified, you get a financial crisis."
Winter added: "I think it's very unlikely we'll have a financial crisis."
"The odds are that there’s going to be a recession. I think this inflation is quite bad, it’s intransigent, it’s not transitory, and the consequences will be recession," @StanChart CEO Bill Winters tells @flacqua https://t.co/WoZPXnbPp1 #QatarEconomicForum pic.twitter.com/eCv9fOcQ9H— Bloomberg Live (@BloombergLive) June 21, 2022
President Biden's view of the U.S. economy differs from the bearish mood at the conference in Doha, who said Monday, "I was talking to Larry Summers this morning, and there's nothing inevitable about a recession."
Biden appears to be living in an alternative reality as Deutsche Bank (the first bank to forecast a U.S. recession in late 2023), and now Nomura is making a recession call. Nomura believes a mild recession starts in 4Q22.
Recession threats surge as things have only gone from bad to worse for the U.S. economy, with the Citi US Eco surprise index plunging to pre-covid levels and multi-year lows...
... while the Atlanta Fed GDPNow tracker for Q2 has collapsed to precisely 0.0%, implying that a technical recession is now virtually certain absent a dramatic improvement in the U.S. economy in the remaining ten days of June, and Q2, which is very much unlikely since the slowdown in the U.S. economy is only accelerating to the downside.
Amid this continued deterioration in U.S. economic data (and the Biden administration continuing to push the rainbow and unicorn narrative of how everything is awesome ahead of midterm elections), some of the smartest people in the room, such as the ones speaking at the economic forum in Doha and even major banks (who previously released notes on the coming downturn) are seeing the same thing: recession.