Banks are facing old and new challenges in fintech M&AFabrice Cabaud/Getty Images
- US GDP shrunk last quarter, and two contractions in a row typically marks a recession.
- Wall Street firms are split on the prospect of whether the US will tumble into one.
- Some say that inflation will continue to rise, making a recession inevitable, and others say it will eventually cool down.
Americans are feeling the weight of inflation — and the biggest financial firms are at a crossroads about whether that means a recession is coming.
Getting food on the table is more expensive. So is putting gas in the tank. And the highest inflation in 40 years has a domino effect on the housing market as well, meaning that buying a home is getting increasingly prohibitive.
This pressure has bled into the most widely monitored measure US economic growth — gross domestic product — which shrank in the first quarter for the first time since the start of the pandemic. If America experiences a second straight period of GDP contraction, that would meet the technical definition of a recession.
With all that going on, it's difficult for many to feel optimistic about the state of the economy.
"People are noticing the higher prices, and that in many cases, their wages aren't keeping up," Tara Sinclair, an economics professor at George Washington University, told Insider.
Several economists told Insider that current inflationary problems are a bump in the road that low and middle-income Americans are reasonably equipped to withstand, pointing to data that shows Americans' finances are actually keeping up with rising costs. There are also plenty of jobs to go around, with the labor market's recovery holding strong. And Americans are still spending, with the savings they amassed during the pandemic still helping to keep the economy afloat.
But some financial professionals have painted a darker picture, with multple large firms forecasting an imminent recession. On the whole, Wall Street is divided.
On one side of the aisle is Bank of America and Deutsche Bank, which say the US is certain to plunge into recession. Opposite them are JPMorgan and UBS, who acknowledge that economic pressures will persist, but don't think a full-on recession is coming.
Here's a more detailed look at what each of the four firms are forecasting: