According to Bank of America (BofA) strategists, the “recession shock” is a realistic outcome for the United States due to the deteriorating macro-economic picture in the country. This is a result of the Federal Reserve tightening its monetary policy in an attempt to battle the surging inflation.
Reuters reports that the warning was issued this week in a note to clients sent out by BofA chief investment strategist Michael Hartnett. The weekly research note also sees Hartnett saying that the “inflation shock” is worsening and “rates shock” is just beginning. He added that the chain reaction could see stocks and bonds being outperformed by cash, commodities, volatility, and even cryptocurrencies.
The Federal Reserve presented several options for reducing its $9 trillion balance sheet during a recent meeting. The culling of assets should start in May and is expected to be done at nearly twice the pace compared to previous “quantitative tightening.”
Bank of America isn’t the only one forecasting a recession in the near future. Deutsche Bank’s economists have already issued a similar warning, although their projection is that the recession will be a “moderate one”. Bill Dudley, who previously served as president of the Federal Reserve Bank of New York, went one step further and even proclaimed that the recession is “virtually inevitable” in his recent opinion piece for Bloomberg.
