Thursday, July 25, 2024

JPMorgan, the global investment bank, has outlined four potential scenarios for the global outlook, with a “boil the frog” recession emerging as the most probable outcome. Economists at the bank have cautioned that a synchronized global downturn is on the horizon, citing broad-based developed-market tightening as a contributing factor.

In its Global Outlook report, JPMorgan provides an overview of the scenarios expected to unfold in 2023 and 2024. The bank’s economists believe that the likelihood of the United States entering a recession outweighs the chances of avoiding one altogether.

The most likely scenario, with a 36% probability, is a “boil the frog” recession, where the United States experiences a downturn concurrently with the rest of the global economy. This outcome is primarily driven by aggressive monetary tightening aimed at combating persistent inflation. Despite central banks’ efforts for a smooth transition, the economists anticipate the need for restrictive policies to counter the expansion, leading to a synchronized global downturn by 2024.

The second most likely scenario, with a 32% probability, is a “slip-sliding away” recession. In this case, the U.S. economy faces a mild downturn due to an ongoing credit crunch, while other economies worldwide display resilience.

Additionally, JPMorgan’s economists assign a 23% probability to a Goldilocks soft landing, where the U.S. economy successfully avoids a recession. Lastly, they identify a 10% probability of a near-term recession occurring in mid-2023.

There is a general expectation that the U.S. economy will enter a recession. Economist Steve Hanke warns of an impending “ugly” recession, while Peter Schiff anticipates a “massive” recession and severe financial crisis. Bank of America is preparing for a mild recession, and Mike McGlone, senior commodity strategist at Bloomberg Intelligence, believes the U.S. economy is headed toward a “severe deflationary recession.” However, Blackrock CEO Larry Fink does not foresee a significant U.S. recession this year.

Which of the scenarios outlined by JPMorgan’s economists do you consider the most likely? Share your thoughts in the comments section below.

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