U.S Recession Risk

EUINTR USINTR

Potential U.S. Recession Amidst Late Business Cycle and Interest Rate Adjustments

Dear Valued Clients,

Currently, we are closely monitoring the developments in the U.S. economy and the potential onset of a recession.

Current Economic Overview

The U.S. is in the late stage of its business cycle, characterized by slowing growth and increased economic uncertainty. Historically, this phase often precedes an economic contraction. The Federal Reserve (FED) has been proactive in managing interest rates to curb inflation and sustain economic growth. However, as the accompanying chart highlights, there are signs that interest rate cuts may be on the horizon.

Interest Rate Dynamics

Our analysis suggests that if the European Central Bank (ECB) continues to raise interest rates while the FED initiates rate cuts, we could witness a significant shift in economic momentum. The historical data depicted in the chart indicates that such divergences in interest rate policies between the ECB and the FED have often foreshadowed U.S. recessions. The blue line represents the ECB interest rates, while the yellow line denotes the FED rates.

Implications for the U.S. Economy

The late business cycle phase, coupled with potential rate cuts, heightens the risk of a recession. The red zones on the chart delineate past U.S. recessions, emphasizing the critical juncture we currently face. Should the ECB's interest rates surpass those of the U.S., the resultant economic pressures could tip the U.S. economy into a recessionary period.

Our team is here to support you in making informed decisions to safeguard and grow your investments.

Thank you for your continued trust and partnership.

Leveraged Team
leveraged.co.za