Curated By: Business Desk
Last Updated: November 22, 2023, 10:58 IST
Shilling founded his economic consulting and investment advisory firm in 1978.
The American economy is the largest in the world, and its fluctuations have a significant impact on the global economy and stock markets.
Renowned economist Gary Shilling, famed for his accurate predictions, has recently raised concerns about a potential recession in the United States. Shilling, known for foreseeing the 2008 recession in the American real estate sector, conveyed his apprehensions on The Julia La Roche Show, indicating that the Federal Reserve might plan to lower interest rates next year to counter inflation.
His latest warning centres around the surge in commercial real estate, which Shilling fears may collapse, triggering a substantial recession. The repercussions, according to him, could lead to a significant 30% decline in the stock market.
Shilling foresees a potential 30% to 40% decline in stocks from their peak, suggesting that the US S&P 500 index might drop to around 2,900 points, reaching levels not seen since the COVID-19 pandemic.
While Shilling acknowledges that the US is not currently in a recession, he emphasizes the potential for one to emerge without clear warning signals. Analyzing key indicators associated with economic downturns, Shilling’s cautionary words echo concerns about the resilience of the US economy.
Given the global impact of the US economy, Shilling’s predictions carry weight. The 2008 US recession, for instance, had profound effects on global stock markets, including in countries like India.
Founder of his economic consulting and investment advisory firm in 1978, Shilling notes that during recessions, corporate profits tend to decline significantly, often leading to a corresponding drop in stock values.
Currently invested in Treasury bonds and the US dollar, Shilling has taken positions against stocks through exchange-traded funds and commodities by shorting copper. As investors digest Shilling’s warnings, the financial markets brace for potential shifts amid economic uncertainty.