The United States is already in recession: an economist

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The US economy is already slipping into recession, according to an economist who specializes in how sentiment affects markets.

He predicted that a large amount of misinvested capital will be wiped out and that sectors of the economy that have historically resisted crises may not be this time.

His research indicates that the economy is influenced by “cyclical confidence” and that when consumer sentiment shifts towards expectation of a recession, the market will actually enter one.

“I think the cake has been baked from a sentiment standpoint where people are now acting on the assumption that a recession is coming. And remember, it is this action that is actually causing a recession,” said Peter Atwater , a former hedge funder and now a lecturer at the College of William & Mary in Virginia, during a recent Wealth maintenance.

According to Atwater, thousands of companies rigged their profits with easy money because of the extremely low interest rates set by the Federal Reserve.

“With free money, the ability to financially organize your income results is limitless,” he said.

Now that rates are rising, these companies will start to have trouble renewing their loans.

“It sucks the air out of the room,” he said, anticipating that “thousands” of those businesses could go bankrupt.

As credit tightens, many “dream” businesses will prove unachievable and fail, he predicted, noting that overconfidence in the market has caused investors “to buy promises even the most ridiculous things”.

“There was so much capital deployed irresponsibly to capture dreams that the volume of stock destruction is going to be massive,” he said.

The financial elite so far fail to appreciate the gravity of the situation because their way of life has become extraordinarily isolated from the reality of a commoner, he surmised, calling it “work blind home”.

“The financial elite spend so much time sequestered away from the real world that I think they’ve lost sight of the fact that the people who deliver things to them, who live in the real world, have to buy gas,” did he declare. said.

In previous recessions, certain parts of the economy were generally spared from major losses and could therefore serve as safe havens for investors. These would include government bonds and corporates serving a high-end clientele, such as producers of luxury goods. In recent years, big tech companies have also been treated as safe bets.

All of those, however, could also be beaten this time around, according to Atwater.

“What I don’t think investors really appreciate is that we’re seeing a simultaneous unwinding of fixed income and equities here. And there will be no place to hide in there,” he said.

Businesses serving the wealthy, meanwhile, may find that their customer base is in worse financial shape than expected.

In recent years, there are indicators that the wealthy have taken on big debts, following the mantra of “don’t sell it, borrow against it,” in order to avoid taxes, Atwater said.

“It’s a masterful fiscal strategy, but it’s completely devoid of any connection to reality,” he said.

As a result, he noted, “no one considered that the greatest potential losses might be among the customers who have so far been the safest.”

He also noticed an unusual phenomenon where market participants become exhausted from prolonged market instability without hitting bottom.

“Everybody, they kind of feel like, ‘Are we there already? It’s finish?’ People are tired. It’s not fear, it’s fatigue. And I’ve never seen a market bottom complain in the sense that we’re all fed up,” he said.

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Petr Svab is a journalist covering New York. Previously, it covered national topics such as politics, economics, education and law enforcement.

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