Top Wall Street Strategist Expresses Worries About Looming Recession: 'We Are At The Very Onset'

NEW YORK (November 20) A renowned Wall Street strategist, Michael Kantrowitz of Piper Sandler, has voiced concerns over the possibility of an imminent recession. This speculation is based on his analysis of various sectors within the U.S. economy.

What Happened: Kantrowitz employs a four-part framework titled HOPE to assess the economic fallout of the Federal Reserve’s interest rate hikes. The term HOPE is an acronym for “housing,” “orders,” “profits,” and “employment.” He asserts that these sectors are sequentially impacted by rate hikes, commencing with housing and concluding with the job market, reported Business Insider.

Kantrowitz’s analysis reveals that the housing sector is currently weak, manufacturing is diminishing, and corporate profit growth has decelerated. The final indicator, employment, is exhibiting signs of fragility, which Kantrowitz interprets as a significant warning sign.

He suggests that a yearly 10% surge in the percentage of jobless individuals is a potential harbinger of an impending recession. The current figure is 7.7% and is climbing. Despite the unemployment rate escalating to 3.9% from 3.4% earlier this year, unemployment claims have not spiked dramatically. However, Kantrowitz predicts they will, due to the correlation between homebuilder sentiment and escalating claims.

“Regarding employment – I see enough data that has me convinced that we are at the very onset of a recession right now,” Kantrowitz added.

Why It Matters: Earlier, UBS Group AG also predicted a U.S. recession in 2024, expecting significant Federal Reserve rate cuts. This forecast was substantially more bearish than the market consensus. However, other economists remained optimistic about a ‘soft landing’ for the U.S. economy, suggesting a return to pre-pandemic inflation rates without triggering a major economic downturn.

Benzinga