“Bond King” Bill Gross says the US economy is headed toward a recession as more signs emerge in the fourth quarter

“Bond King” Bill Gross says the US economy is headed toward a recession as more signs emerge in the fourth quarter

Bill Gross
American consumers are falling behind on their car payments. “Bond King” Bill Gross said this could be a bad omen for the US economy.Reuters/Jim Young

  • Bill Gross said that the United States could sink into recession by the fourth quarter.

  • The legendary investor pointed to the disturbing economic data and banking turmoil we saw earlier this year.

  • The risk of a mild recession in 2024 cannot be written off, leading forecasters say.

The US economy may be heading toward a recession, and upcoming signs of weakness may soon be flashing red, according to “Bond King” Bill Gross.

The legendary fixed income investor and former co-founder of PIMCO warned that the U.S. is likely plunging into a recession in a recent post on The Atlanta Fed’s GDP growth forecast is less than 1.5% for the current quarter, despite the significant 4.9% growth recorded during the third quarter.

“We’ll see that in the fourth quarter,” Gross said of the GDP slowdown. “We will probably see it officially…a positive number, but in reality, in terms of employment, in terms of jobs, in terms of weakness in many indicators, we will see November and December.” under the line.”

This contradicts what other Wall Street commentators are saying, who point to the economy’s resilience and the possibility that the US will avoid a recession this year. Inflation has slowed significantly from peaks of over 9% in the summer of 2022, and the labor market remains strong through 2023.

But the headwinds are getting stronger. Bond yields rose last month to their highest level in 16 years, as investors worry about the impact of interest rates remaining high for longer. Meanwhile, regional banks have been “devastated” this year since the collapse of Silicon Valley Bank and the rise in Treasury yields at the end of the long-term yield curve, Gross said.

“This is usually an indication of some serious problems regarding the economy,” he added.

At the same time, consumer loan delinquency rates began to rise. A record number of subprime borrowers are behind on their auto loan payments by at least 60 days, according to data from Fitch Ratings.

“To me, this indicates that the consumer is lagging behind in terms of their ability to pay,” Gross said. “And of course, the American economy is 70% dependent on consumer spending.”

The economy also appears to be slowing as the end of the year approaches. The economy added just 150,000 jobs in October, the Bureau of Labor Statistics reported Friday, falling short of expectations of 180,000 jobs.

Leading forecasters have warned that the risk of a mild recession next year cannot be ruled out. Strategists at JP Morgan previously said a synchronized global downturn was the most likely scenario in 2024, and they estimated the United States had only a 23% chance of avoiding it.

Read the original article on Business Insider

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