- The risk of a recession in the US is growing, says economist David Rosenberg of Rosenberg Research.
- Rosenberg’s analysis shows that 45% of recession indicators have been triggered, up from 10% in 2022.
- He recommends diversifying portfolios with government bonds, gold and defensive stocks like utilities.
The likelihood of a recession hitting the US economy is growing after a flurry of signals emerged in recent weeks and months.
That’s according to economist David Rosenberg of Rosenberg Research, who compiled a list of recession indicators in a note Friday.
“What’s the best indicator of a recession? That’s a tough question to answer — why avoid it altogether and not look at all of them?” Rosenberg asked.
Rosenberg’s compilation of 20 recession indicators comes as the U.S. economy continues its resilient run, defying recession callers.
Second quarter GDP growth were revised higher than expected to 3.0% from 2.8% expected on Thursday, retail spending data remains solid and consumers could soon breathe again when the Federal Reserve lowers interest rates, which is expected in September.
But according to Rosenberg, some worrisome signals have historically only appeared on the precipice of an economic downturn.
“The ‘indicator’ indicator suggests a recession,” Rosenberg said.
Of the 20 recession indicators compiled by Rosenberg, nine have been triggered.
Rosenberg’s research
Some of the recession signals that have flashed include Sahm’s rule, index of the main economic indicator a inverted yield curve, among others.
Many of the recessionary indicators that have yet to blink are found in the manufacturing and transportation sectors, which remain solid.
“Right now, 45% of the recession indicators we’ve been watching have started. Going back to 1999, it’s never happened without a recession,” Rosenberg said.
The list of flashing signals has been growing steadily since 2022, when only 10% were launched. This increased to around 25% in 2023 and the first half of 2024.
Since then, however, the recession warning has intensified.
“Sometimes more is more, and this is a case in point. A look at recession thresholds across different sectors of the economy clearly shows that something is changing from mid-2024 – the long-awaited slowdown may finally be coming,” Rosenberg said. .
To prepare for a potential economic downturn, Rosenberg advised clients to diversify their portfolios into “recession-proof” assets such as Treasuries and gold and tilt defensive stocks such as utilities and consumer staples.
Below is a list of 20 recession indicators compiled by Rosenberg Research.
Rosenberg’s research