The US now has an 85% chance of recession in 2024, the highest probability since the Great Financial Crisis, economist David Rosenberg says

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The US now has an 85% chance of recession in 2024, the highest probability since the Great Financial Crisis, economist David Rosenberg says
The US economy is showing resilience, but experts warn a recession is still on the table.Robert Alexander / Getty
  • There's an 85% chance the US economy will enter a recession in 2024, the economist David Rosenberg says.
  • He highlighted a relatively new economic model that has proven to be more timely than the yield-curve indicator.
  • "Our conviction that the recession has been delayed but not derailed is still running at a high level," Rosenberg said.
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A recession is likely to hit the US economy in 2024, a new economic model highlighted by the economist David Rosenberg suggests.

The economic indicator, which Rosenberg calls the "full model," suggests there's an 85% chance of a recession striking within the next 12 months.

That's the model's highest reading since the Great Financial Crisis in 2008.

The model is based on a working National Bureau of Economic Research paper and consists of financial conditions indexes, the debt-service ratio, foreign term spreads, and the level of the yield curve.

Rosenberg said this economic model had "superiority" over other models due to its history of providing a timely warning of recessions without firing any false signals since 1999.

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He noted that in early 2023 this model suggested only a 12% chance of a recession — while the yield-curve indicator said the odds of a recession were 50% at the time.

The US now has an 85% chance of recession in 2024, the highest probability since the Great Financial Crisis, economist David Rosenberg says
Rosenberg Research

"The full model predicted the 'soft landing' we saw in 2023 — but now is saying that for 2024, recession probabilities are highly elevated," Rosenberg said.

The model calls into question the growing narrative that the economy is about to pull off a "soft landing" or "no landing" scenario this year.

"Our conviction that the recession has been delayed but not derailed is still running at a high level," Rosenberg said.

He said if a recession did materialize, it would probably be disastrous for the stock market.

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"Few asset classes are priced for that outcome, even though recessions are part and parcel of the business cycle and almost always come on the heels of a Fed rate-hiking cycle that continues past the point of yield curve inversion," Rosenberg said.

The model utilized by Rosenberg also helps explain why the closely followed yield-curve indicator has so far been inaccurate in predicting a recession.

"It also explains why the yield curve didn't work as a recession predictor in 2017-19: easy financial conditions, extremely low debt service obligations, and favorable foreign term spreads offset the signal from the inverted U.S. yield curve," Rosenberg said.

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