We've been dealing with brutal inflation for so long that we've forgotten the very real possibility that we might tumble into a recession:
In an interview with Business Insider, [Wall Street veteran Gary Shilling] — who was among the investors in the mid-2000s to call the subprime-mortgage bubble — said he saw a recession coming by the end of the year as the job market continued to weaken. That could be the final blow to the stock-market rally fueled by investor overconfidence, causing stocks to drop by as much as 30%, Shilling said.
Thirty. Percent.
Shilling argued that a major factor could be "the recent run-up in risky assets, such as stocks and cryptocurrency." The market itself, he said, is "indicative of a lot of overconfidence, and that usually gets corrected and corrected violently."
High interest rates are also pummeling the market, he pointed out. Of course, that's been obvious to us normal mortals for a long time now:
But the job market is also showing signs of weakness, with firms pulling back on hiring and workers staying put as the signs of a faltering market become more obvious. Part of that may stem from the pandemic:
Shilling believes companies have held onto more workers than needed because of the shortage of labor that slammed employers during the pandemic. He predicted layoffs would escalate later this year, with unemployment peaking at 5% to 7% as the economy weakened.
The prognosticator admitted that warning signs can be variable, but they're "reliable enough," and:
I think that the safe bet is for a recession starting later this year if we're not already in it.
Buckle up, folks.
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