Legendary economist Gary Schilling continued his warning about the state of the economy, warning that the United States is likely headed toward significant growth. recession And the president stock market sale.
Schilling, president of A. Gary Schilling & Co., said the broader economic backdrop remained fragile, arguing that there was little fundamental support underpinning the US economy, he said in his report. interview With David Lean Published May 15.
According to the veteran economist, the weak environment could lead to a broader downturn affecting stocks and the broader corporate sector.
He described the current market as a “risk off” environment despite the strong bullish sentiment among investors and speculators.
Schilling noted that the optimism surrounding the economy and financial Markets have become overheated, especially in stocks, as speculative activity continues to rise.
“There is not a lot of fundamental support for the US economy, and as a result, I think it is very likely that we will see a major recession and a broad sell-off in stocks,” he said. <…> This is a risk-free environment. “This is not a very popular belief right now because there are many more investors and more speculators who believe things are heading to the moon.”
Lessons learned from past recessions
The economist also warned that many current conditions resemble those seen before previous bear markets and recessions.
He pointed to the large amount of liquidity circulating in the markets and the increasing flow of capital into speculative assets as signs of rising financial risks.
Schilling also said that the US economy has become increasingly dependent on spending by wealthier consumers.
The expert warned that if high-income households reduce spending for any reason, economic activity could weaken sharply, increasing the risk of recession.
This warning comes at a time when markets are still volatile despite recording several record levels.
For example, Standard & Poor’s 500 The index recently reached a record high of around 7,500 before retreating amid broader market concerns about geopolitical tensions between the United States and Iran, as well as growing concerns about rising inflation.
