Julian Emanuel, Senior Managing Director of the Equities Division at market research firm Evercore ISI, said that the US economy will "sooner or later" enter a recession, which could lead to a sharp drop in the stock market in the first half of 2024 and a rebound before the end of the year.
Emanuel stated in the latest interview that he expects the economy to enter a recession at some point in the first quarter of next year. This may cause the S&P 500 index to drop to 3970 points, a 14.5% drop from its current level.
Entering 2024, the US economy will face many unfavorable factors. Firstly, if Congress members cannot finalize the budget for this fiscal year before February next year, the US government still faces risks related to the door, which typically leads to a significant drop in the stock market. This is also accompanied by a geopolitical headwind and the approaching American election campaign.
At the same time, the US economy is slowly but noticeably slowing down. Last month, the unemployment rate slightly decreased to 3.7%, but the labor market began to weaken. Meanwhile, American consumers have started to slow down after spending heavily in 2023.
Emanuel stated that this could lead the economy into a consumer led slowdown and push the United States to the brink of recession.
But he also stated that the eventual economic recession may provide investors with buying opportunities. He believes that the stock market will benefit from a sustained decline in inflation. He predicts that the S&P 500 index will rebound to 4750 points by the end of next year, 19% higher than the level he predicted for the stock market to hit bottom in the first half of 2024.
"There will be enough event risks in the next 12 months, and the policy tightening will be strong enough, so there will be a temptation to sell low and buy high. We don't want to do this," Emanuel said. "This will be a year where you must have patience... In the end, patience will pay off."
Over the past year, with the Federal Reserve raising interest rates aggressively to reduce inflation, experts have warned that the economy may experience a recession. High interest rates may lead to excessive economic tightening and plunge it into a downturn. The New York Federal Reserve currently predicts a 50% chance of the United States falling into a recession before November 2024.
However, Wall Street seems to be becoming increasingly optimistic. Investors and analysts are heating up the prospect of a soft landing, with Bank of America and Deutsche Bank predicting that the S&P 500 index may reach a historic high in 2024 as the economy avoids recession.