A ‘severe recession’ may be coming in 2024 as the stock market, job market flash warning signs, strategist says

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The US could be in for a “severe recession” in early 2024, Briley Wealth’s Paul Dietrich warned.

That’s due to an array of recessionary signals that are flashing in the economy.

The stock market’s explosive rally is one such sign the economy could soon contract.

The US could fall into a severe downturn in early 2024 as a handful of recession signals flash throughout the economy, according to Briley Wealth’s chief investment strategist Paul Dietrich.

In a note on Friday, Dietrich pointed to monster gains investors have seen in the S&P 500 this year, with the benchmark index notching its best month of the year in November.

That rally has largely been fueled by expectations the Federal Reserve will cut interest rates early next year — but rate cuts likely aren’t coming until the economy tips into a downturn, Dietrich warned.

“Investors shouldn’t count on the central bank lowering borrowing costs unless the US economy falls into a severe recession — which may happen early next year,” Dietrich said. “The Fed typically starts cutting rates when there is a sharply slowing economy and rising unemployment — meaning a recession.”

Signs of a recession are starting to build, Dietrich notes. The stock market’s 20% rally this year is one such warning, he said, as the S&P 500 has typically posted outsized gains in the months leading up to a downturn. That was the case prior to the 2001, 2008, and 2020 recessions, when stocks rallied sharply before the economy began contracting.

There are other “stock market disconnects” that are making the case the economy will soon roll over into a downturn, he added. Though the S&P 500 is up overall for the year, the S&P 500 equal-weighed index, which is more representative of the average stock, has fallen into “correction territory,” Dietrich said.

The labor market is also starting to weaken. Job openings have fallen, while continuing claims for unemployment benefits have steadily been rising.

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And though the overall unemployment rate ticked lower in November, continuing unemployment claims briefly rose to 1.93 million…


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