Steve Hank, professor of applied economics at Johns Hopkins University, stated that the possibility of the United States entering the recession in 2025 greatly exceeds unanimity estimates, which represents a possibility of 90 %.
Hank’s prediction greatly exceeds expectations from major financial institutions such as JPMorgan and Goldman Sachs, which is estimated at 40 % and 60 %.
He pointed to a slowdown in economic activity as the primary driver, noting that the recession is likely to lead to a decrease in sales, profits and companies’ profits. interview With David Lin published on April 13.
“I think it’s more than 90 % [probability of a recession] this year. <...> We have a recession, and with stagnation, sales decrease, and if sales decrease, profits decrease, and profits decrease. ”
The economist also criticized consensus profit forecasts, which have already been revised from 15 % to 10 % of the growth of the S&P 500. Hank believes that these estimates remain excessively optimistic, zero or even decrease, and his look with the CEO of Jpmorgan.
Dimon recently suggested that analysts can reduce S&P 500 profits to flat or low up to 5 % negative in the coming months.
Lessons from the Great Depression
In drawing historical similarities, Hank referred to the great depression, where the devastating effect of the introductory SMOOT-HWLY law for the year 1930. He pointed out that the declaration of customs tariffs in March 1930 caused the collapse of the stock market, as the market decreased by 83 % by July 1932.
Hank expressed concern about the current economic policies, warning that the proposed tariff may exacerbate economic conditions, which may be frequent in disturbances in the thirties of the twentieth century.
As I mentioned earlier by Finbold, Hanke repeated his warning in the recession, focusing on the fact that internal economic contractions, not external shocks, are sufficient to stir a shrinkage. He believes that the slowdown is inevitable unless the monetary policy changes significantly.
The warning came at a time when President Donald Trump was prepared to impose a mutual tariff on countries like China. In fact, customs duties were implemented in most countries, which led to a decrease in the market.
However, the President reversed the path, as he issued a 90 -day tariff for most countries except China. However, the market remains on the edge with regard to the complete impact of definitions on the economy.
Watch the full interview below
Distinctive image via Shutterstock
