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Investing.com -- The United States is predicted to face a recession in the first half of 2025, which could lead to the most impactful economic disruption since the 2008 global financial crisis. This warning comes from the CEO of the international financial advisory and asset management organization, deVere Group. The CEO, Nigel Green, states that various pressures on crucial economic aspects are aligning, making this downturn increasingly unavoidable.
Green advises investors to start preparing as the impending recession will impact global markets, creating both gains and losses. The CEO points out that the US economy is showing signs of deepening cracks. He attributes this to the unpredictable tariff policies, which have led to increased uncertainty for businesses and investors. This uncertainty has already caused damage, shaking investor confidence and forcing businesses to adapt to unexpected costs.
Additionally, Green notes that the US economic growth is being hindered by high interest rates, ongoing inflationary pressures, and increasing geopolitical uncertainties. Consumer spending, which has traditionally been a stabilizing factor for the US economy, is showing signs of strain. The CEO points out that retail sales data indicate that households are prioritizing necessities over discretionary purchases, a common sign of an upcoming economic contraction.
Business investment is also slowing down as companies are postponing expansion plans due to the expectation of weaker demand. Green adds that corporate earnings reports are suggesting squeezed profit margins, and the once reassuring labor market strength now appears more fragile than headline figures suggest.
The Federal Reserve’s federal funds rate, confirmed at its January 2025 meeting, is currently at 4.25%-4.50%. These high rates were maintained to fight inflation, but the economic strain is becoming more and more apparent. Mortgage rates are also high, averaging around 6.65% for a 30-year fixed mortgage, further dampening consumer and business sentiment.
Green suggests that the Federal Reserve is likely to start reducing rates to counteract a sharper downturn. However, he notes that the effectiveness of such cuts remains uncertain as recessionary pressures are already well established.
The potential US recession will have significant implications for the global economy. As the world’s largest economy, a downturn in the US will affect countries globally. Major trading partners, including Europe, Australia, Latin America, and Asia, will experience a decrease in export demand. Emerging markets, especially those with high debt exposure, are particularly at risk. Currency volatility is expected to increase, making risk-sensitive assets more unpredictable.
In the corporate world, fears of a recession are already changing behaviors. Hiring freezes and layoffs are becoming more common across various industries, including technology and financial services. Private equity firms are holding off on major acquisitions due to concerns about overpaying in a market where valuations could drop.
Credit markets are becoming more restrictive, and smaller businesses, which rely heavily on accessible financing, are feeling the pressure first. As growth slows, defaults are expected to increase, leading to a shift in market sentiment.
US equity markets, including the Nasdaq and S&P 500, are also showing warning signs as they enter correction territory, reinforcing fears that the downturn is accelerating.
Despite the crisis, Green notes that there are always winners and losers. He suggests that defensive sectors like healthcare and consumer staples are better positioned to withstand the storm. Safe-haven assets, such as gold and high-quality bonds, are likely to attract renewed investor interest.
Green advises investors to reassess their portfolios, hedge against volatility, and adapt to changing market dynamics. Holding excess cash might not be the best strategy as lingering inflation could erode purchasing power. Instead, strategic reallocation towards quality equities, defensive assets, and global diversification will be crucial for thriving in the upcoming turbulence.
In conclusion, Green states that the countdown to a US recession has begun.
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