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JP Morgan And Citigroup Agree That The U.S. Economy Is Steamrolling Toward A Recession

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Locomotive - Public DomainAs we approach the end of 2015, researchers at both JP Morgan and Citigroup agree that the probability that the U.S. economy will soon plunge into recession is rising.  Just last week, a member of the U.S. House of Representatives asked Janet Yellen about Citigroup’s assessment that there is a 65 percent chance that the United States will experience an economic recession in 2016.  You can read her answer below.  And just a few days ago, JP Morgan economists Michael Feroli, Daniel Silver, Jesse Edgerton, and Robert Mellman released a report in which they declared that “the probability of recession within three years” has risen to “an eye-catching 76%”

“Our longer-run indicators, however, continue to suggest an elevated risk that the expansion is nearing its end, and our preferred model now puts the probability of recession within three years at an eye-catching 76%.”

The good news is that the economists at JP Morgan believe that a recession will probably not hit us within the next six months.  But due to steadily weakening economic conditions, they are convinced that one is almost certain to strike within the next few years

“When we first wrote, only manufacturing sentiment was signaling an above-average probability of imminent recession,” they said. “But recent weakening in the Richmond Fed services survey and the ISM nonmanufacturing index have now pushed the nonmanufacturing sentiment probability up somewhat as well.”

In the short term, the note says that the 6-month likelihood is only 5%, but within a year it stands at 23%, in two years 48%, and in three years the “eye-popping” 76%.

To be honest, I believe that this assessment is far too optimistic, and it appears that researchers at Citigroup agree with me.  According to them, there is a 65 percent chance that the U.S. economy will plunge into recession by the end of next year.  Last week, Janet Yellen was asked about this during testimony before Congress

In testimony before Congress’ Joint Economic Committee, Yellen was asked by Rep. Pat Tiberi about a piece of research released by Citigroup’s rates strategy team Monday.

Specifically, Tiberi, an Ohio Republican, wanted to know what Yellen made of Citi’s conclusion that there is a 65 percent chance of a U.S. recession in 2016.

“The economists said that they would assign about a 65 percent likelihood of a recession in the United States in 2016. Now, 65 percent sounds high to me, but I’m not an economist and I’m not the Fed chair. But zero risk might be too low as well. So what would you assign a risk level of a recession next year?” Tiberi asked.

So how did Yellen respond?

Her answer was about what you would expect

“I absolutely wouldn’t see it as anything approaching 65 percent,” the central banker said.

This reminds me so much of what former Federal Reserve Chairman Ben Bernanke said when he was asked a similar question back in 2008

“The Federal Reserve is not currently forecasting a recession.”

Later on, when the official numbers finally came out and all the revisions were done, we learned that the U.S. economy was already in a recession when he made that statement.

And when it is all said and done this time around, I believe that history will show that a new global recession had already started when Janet Yellen made her statement.

But don’t just take my word for it.  British banking giant HSBC is the largest bank in the western world, and they recently announced that the global economy has already entered a “dollar recession“.  According to HSBC, total global trade has fallen 8.4 percent so far this year, and global GDP expressed in U.S. dollars is down 3.4 percent.

If their figures are correct, a new global recession has definitely begun.

And without a doubt, we have already seen a tremendous amount of global financial turmoil.  This is something that I highlighted in my recent article entitled “27 Major Global Stocks Markets That Have Already Crashed By Double Digit Percentages In 2015“.  When Zero Hedge republished my article, several excellent charts were added that really illustrate how bad things have gotten, and I wanted to share a couple of them with you.  Of the 93 largest stock market indexes in the world, an astounding 47 of them (more than half) are down at least 10 percent year to date.  This first chart shows which ones fall into that category…

47 Out Of 93

Another chart that was added to the article by Zero Hedge shows how decoupled U.S. stocks have become from global stocks overall.  As you can see, U.S. stocks are not too far from recent highs at the moment, but global stocks overall are solidly in bear market territory…

US Stocks And World Stocks

Since mid-2015, trillions of dollars of stock market wealth has been wiped out globally.

Let that sink in for a moment.

The debate is over.  The “major financial collapse” that so many warned was imminent has actually happened.

It is just that U.S. stocks have not gotten the memo yet.  Up to this point they have defied gravity, but at some point U.S. stocks and world stocks will converge once again.

And if you want to see many of the reasons why U.S. stocks will soon take a big tumble, just check out this article.  There is no way that U.S. stocks will be able to defy the underlying economic fundamentals that are pummeling other global markets for much longer.  Just like in 2008, a global stock market slide that starts elsewhere will eventually hit the United States.  It is just a matter of time.

But once again, even though U.S. stocks are doing okay for the moment, that doesn’t negate the fact that more than half of all major global stock indexes are down by double digit percentages year to date.

We have not seen numbers like this since the great stock market crash of 2008, and it seems abundantly clear to me that the great financial shaking that so many warned was coming in 2015 is already happening.

And if JP Morgan and Citigroup are correct, what we have seen so far is just a preview of some very troubling times ahead.

  • MIchael in Chicago

    Perhaps the long overdue rate hike next week will be the Black Swan event. Or perhaps all the monthly lying Yellen has been doing will finally catch up to her and not raising will cause the markets to correct. Whatever happens will probably end up being bullish in this bad news is good news bizarro Wall Street world.

    • df NJ

      Raising interest rates will make gasoline cheaper. People saving money will not be taxed as much with higher interest rates. I think raising interest rates will probably not hurt the US economy because it will have counter acting macro-economic effects. However, emerging markets holding making debt payments in US dollars will suffer. It will like the Federal Reserve bank will be taxing the rest of the world to increase the power of the dollar.

      • Bill G Wilminton NC

        Raising interest rates will finish the home market because people buy not on house price but on the payment amount.
        And those selling their house will lose a proportionate amount to the interest increase.

    • Jill

      I imagine the post-holiday retail sales numbers will do more to drag down the economy.

  • K2

    Lol what is happening now is not remotely close to what happened in 2008. US economy is still growing, when the economy contracts thats a recession.

    • RTL89

      You are completely delusional. The “ONLY” reason why we haven’t seen a collapse yet s due to the vastly overmanipulated numbers. That’s it.. nothing else. If this debt-based cycle were actually based on REAL monetary value, it would have fallen like a rock back in September. As long as they can persuade us that everything is fine by promising future rate hikes, buying their own stocks to keep the markets propped up, and manipulating the unemployment numbers, then they have the general populace held under the perception that everything is fine. There is no manufacturing because warehouses have unsold merchandise because people have jobs. And you call this “growing”??? What planet do you honestly live on, Mister? Confidence is the only thing propping this up. And it’s people like you who lick it up!!

      • Watchman

        RTL89 he is probably Jazz/Zazz’s sidekick (K2). And of course they continue to tout how the economy is great and everything. Yet 2008 is playing out in similar fashion right now on many similar factors including junk bonds, cds, derivatives, subprime lending etc…

        • Uncle Scam

          All crashes get worse everyime, this one will be like 2008 but on steroids.

          • Watchman

            Yes and if you follow the 7 year economic theory each subsequent crash is worse.

          • Bill G Wilminton NC

            yes………….

        • K2

          I have been visiting and posting on this blog far earlier than you or jazz, i am nobody’s sidekick.

      • Bill G Wilminton NC

        unfortunately well said……….thanks

      • K2

        Well its still growing right? Thats the point i am making, the US is not in a recession.

        • RTL89

          Again, you’re delusional. Real growth is when the government earns money in taxes, saves, and then creates jobs. Real growth is when people earn good wages and go out and spend their disposable incomes. Real growth is when trucks are transporting goods to factories and warehouses. None of that is happening. Just because a few investors are lining their pockets does NOT mean we are doing well. If that were the case, 2/3 of the population wouldn’t be on food stamps.

          • K2

            You are delusional, all of those you mentioned are happening.

  • Priszilla

    If you can wipe out trillions just like that, then what are these trillions worth?

  • J B

    Recession…They’re still Bullsh’n even when the cards are face up
    Deflation first, then Inflation
    You can only hope it will be a Recession

    • terry richards

      Yup, inflation is like a tsunami, first you get drawback, where the water recedes, going abnormally low (deflation), then the wave of inflation hits….

      • Evil_shadow

        IMHO europe will go under first; our “precious” chairman of ECB( european central bank) announced not long ago, that they will continue “QE-like” financial instrument even if current one is still in progress.With half of the countries in Eu broke or nearly broke i’d put my cards that EU will go down first, then US will follow.

  • Jp

    Irrarional exuberant deja vu all over again ?

  • Horiboyable .

    I don’t think the USA stock market will collapse, in fact I think you could see it double in a short period of time.
    Take a look globally round the world. The emerging markets are collapsing, there is about 9 trillion of debt out there in the form of bonds. Take a look at the Euro area, investors are getting out of their long positions and are jumping into the short end (2-5), European banks are on life support and France is showing signs of turning to their right wing Le Penn whom wants to get out of the Euro. I think the smart money realises there are dangers round bonds and the slightest event will cause the flight to quality which is capital coming into the USA. Now if there is issues in the bond market where else can they park it? It has to be in stocks and shares.

    • J B

      But that’s just doubling due to money printing, not actual product.
      Somebody will have to have face the music, pay the piper and it’s not going to be the Banks, it will you, me and everybody else.

      • Horiboyable .

        This will be very messy and very painful.
        Multiple sovereign defaults, housing will decline in value for 15 years or more (like Japan) Real Estate there is still 60% down from the 1991 highs.
        They are trying to start a war in the middle east to divert our attention.

        • J B

          Only if you have any type of loan , mortgage, superannuation fund, own any stocks, have a bank account, the Banks won’t feel a thing.
          It’s not just a simple wealth transfer, it’s wealth transfer on a global scale. But not too be out done, the Banks will save the day by offering new loans to pay off your old loans.

          • Bill G Wilminton NC

            Well said………. all about NWO and the coming Leader of the NWO.

      • Bill G Wilminton NC

        Well said JB………

    • sjpllc

      Interesting take on the situation. Your point deserves further investigation. Thank you for your reasonable comments. What are your thoughts on the US decreases in the manufacturing sector and its relationship to the increasing strength of the dollar?

      • Horiboyable .

        Capital in flows into the USA has started already, in China they are trying to stop the out flows. When the flows become a panic the dollar will rise higher and wipe out all the emerging markets, estimates are there is anything from 9 trillion to 23 trillion. This will blow up because this debt is in USD and as the dollar rises it take much more local currency to make the payments. There is about 600 to 800 billion in the now unprofitable shale plays and you are already seeing problems in the junk bonds with these energy companies. Manufacturing in the US will decline as the dollar rises the the car market will be carnage, too much subprime debt propping up the car sector. Interest rates must rise otherwise they are going to blow up the pension industry. Pension funds were modeled on interest rates round 6 to 8 %. Every western government is broke, their debt levels are at the stage where they can not pay it back. I dont think it will be a dramatic crash but a slow grinding down turn that will last many years. Think Japan after after 91/92

        • GoldenGirl

          I could not agree with you more.

        • Bill G Wilminton NC

          As all these dollars flood into the USA will lead to massive inflation……..all by design and this leads to NWO.

  • XSANDIEGOCA

    The Economy is being massaged to get Hillary elected. If Trump should be elected, Yellen will reacquire Fiscal Religion and rates will soar to 5% in very short order. There will also be cries for Trump to reign in the Imperial Presidency but that is another story.

    • df NJ

      Regardless of the national polls, I’m not sure Hillary will win the nomination. The is so much negativity about her.

      • XSANDIEGOCA

        Very possible. Obama just might be enjoying letting her dangle. Taking the Machiavellian point of view…. Obama drops the indictment just before the convention. Joe and Liz appear, deus ex machina, to sweeping acclaim! Very possible.

    • Bill G Wilminton NC

      Well said sir………….and blame the collapse on Trump. I would rather go down with Trump at the helm than that horror Hildebeast.

      The end is right before us………it seems that more and more people are getting their eyesight back and are moving to support Trump. Everywhere he speaks is packed.

      • XSANDIEGOCA

        Record gun sales. People are voting with their …. guns!

        • Bill G Wilminton NC

          Liberty University President says he wants a legally armed student body and faculty immediately !…..that equals 10,000 students. How long would a Farooky Padooky with bad intentions last on that campus. Boom boom boom…………

          • XSANDIEGOCA

            If we are to go down, then let us go down with flags flying, standing on our feet with honor intact! GO TRUMP, GO!

  • Steeve Girard

    The collapse is still happening at this moment, we have not reach the depth of the barrel. We are facing a 50-75 years of depression, due to end of cheap oil. We are consuming the last of it at an accelerated pace, and the price crash cause by OPEC, to kill the shale industry, is just gonna facilitate it’s end. It’s gonna be at it’s quickest drop after 2030.

    • Steve Jones

      perhaps… why do you think this?

      • Steeve Girard

        Because of Thermodynamics. When a system is no longer maintain by a constant influx of energy, the entropy inside, expands. It will take a long time, because we will do everything in our power to “prevent” the unpreventable.

  • CLG

    How come recent published data are good? They are saying there’s a strong chance of the first rate hike. What data are they not seeing?

  • merrileerj

    So now it’s “within the next 3 years”??? I’m growing weary. Feel my guard dropping. Not good.

    • chilller

      With all the counterfeiting the fed is doing…they aren’t sure exactly when the rest of the world will say “Enough”! In the mean while…print…print…print…

      • df NJ

        There may be counterfeiting going on but nobody prints as much as the Fed so it doesn’t matter.

        • Bill G Wilminton NC

          Yes it does because it is debt based and we go deeper and deeper in debt to the Fed Reserve which is neither Federal nor a Reserve.
          And when the interest rate goes UP the interest will be close to one trillion per year…..just the interest alone.

    • Richard O. Mann

      I know the feeling.

    • leon

      i know. thats all these collapse blogs do…is keep pushing the collapse months and years.
      collaps 2049! no doubt!
      how is that red alert? michael smart. tptb smarter or at least more fraudulent and this will go on forever!
      everywhere i go….i see new cars, restaurants packed, etc etc etc

      • TBonePickens

        The real crash is the slow, ongoing crash of the American middle class, which is still in recession since 2008.

        • Bill G Wilminton NC

          Like a slow motion avalanche………..

    • alan

      You are suffering economic collapse fatigue. See you doctor for some heavy meds.

    • Evil_shadow

      i’d say that’s THEIR version of it.i think it was just the same in early 2008, right before everything went to hell…it has happened before, why cant happen again? they are doing everything like they did before…

  • chilller

    We know the Fed and their minions are all a bunch of lying, cheating, greedy SOB’s….so why would anyone give anything any of them say any credibility? If their lips are moving…they’re lying.

    • df NJ

      Because people want to believe everything is okay rather than listen to people like you. People wake up, they put own their work cloths, they go to work, they get a paycheck, buy groceries, and watch their children grow up. That’s what people do and will continue to do. It has nothing to do with how much derivative debt BofA has in emerging markets. As long as people are willing to go to work the dollar will continue to have value. It’s kind of irrelevant how much money exists as numbers in computer databases. The reality is people will continue to work and eat. Once that’s stop, then maybe YOU will have some credibility.

      • TBonePickens

        There is more money than ever in the derivatives market right now, which is scary AF.

      • geoffandmarie418@aol.com

        People are also very naïve of the WOrld around them.

    • Bill G Wilminton NC

      Oh boy well said……………..thanks

    • guest

      Don’t beat around the Bush . If you don’t trust the fed say so!

  • df NJ

    Oil down 6% today. One interest rate hike oil drops to $20/barrel and we will see gasoline under $1.50 per gallon.

    Hey, what happens to the price of gold if the interest rates get hiked? Maybe we will see $800/oz gold by summer next year!

    Natural gas is going to free soon!

    • Bill G Wilminton NC

      Deflation in certain commodities………….but not in housing food and healthcare………..the world of finance is fracturing.

      This the prelude to the New World Order.

      • Uncle Scam

        The NWO is already here.

        • Bill G Wilminton NC

          Yes you are right…….more to come one world religion, one world gov and one world economy and your number 666.

    • Former Goldbug

      Gold is going to $500/oz. Dollar is too strong & will only get stronger. Oil should hit $20/brl

  • GSOB

    God imposed a great tribulation on the old order of the
    apostate Hebrews, but Satan imitates God by imposing
    holocausts on mankind through his followers.

    • df NJ

      “The God of the Old Testament is arguably the most unpleasant character in all fiction: jealous and proud of it; a petty, unjust, unforgiving control-freak; a vindictive, bloodthirsty ethnic cleanser; a misogynistic, homophobic, racist, infanticidal, genocidal, filicidal, pestilential, megalomaniacal, sadomasochistic, capriciously malevolent bully.”

      There are just too many religions and too many versions of the Bible. I think all words about God are written by man where no words are more sacred than any other. I think the ancient Coptic texts were interpreted to serve the King James authoritarian feudalism. So my current thinking is sin was something created so the church had something to sell. Jesus came along and said you did not need to buy your salvation from the church so elders of the church crucified him. At that point you no longer had to buy your salvation from the church because Christ being killed stopped the practice. So in the end, Christ died so other people’s sins would be paid off there after.

      But I think it goes deeper than that. I think Christ really got the church elders angry by telling the people sin is a hoax. If you an omnipotent God who is all-powerful, all-loving, and all-forgiving, then maybe what Christ was really saying was our all-loving all-power God allows everything through the gates of heaven regardless of our earthly sins or how we practice our religion. Through the grace of God’s omnipotence everyone gets to experience heavenly eternal bliss. Jesus took away the church’s cash cow. That’s the kind of heresy that gets you crucified.

      • Gay Veteran

        religion exists for 2 reasons:
        (1) man fears death
        (2) as a means of social control (obey the king or you’ll go to h ell).

        heck, toss in a third reason:
        (3) as a means for priests/preachers to obtain money and power

        • God is Not Dead

          People who don’t like God’s will and set of rules, pretend He doesn’t exist so they are not convicted for their sinful lifestyle.

          • Gay Veteran

            plenty of moral people who don’t believe in god

          • GSOB

            They are called ‘moralist’.

        • GSOB

          The first is somewhat true Gay guy.
          The other two undoubtedly is true but not of the Lord.

          • Gay Veteran

            the first is absolutely true my dear parrot

          • GSOB

            Well, finally a confession from you….
            you do fear death…

          • Gay Veteran

            no fairy tales will save you

          • GSOB

            God will show mercy and who He wills.

          • Gay Veteran

            so you desperately hope

          • Bill G Wilminton NC

            Mr GSOB……….. don’t debate with a fool those listening wont know the difference…….gay guy has an agenda.

      • Bill G Wilminton NC

        The road to the abyss is wide the road to heaven is narrow…………..

        • GSOB

          True.

          The destruction of Jerusalem was the sign that the Son of Man, the Second Adam, was in heaven,
          ruling over the world and disposing it for His own purposes.

          At His ascension, He had come on the clouds of heaven to receive the Kingdom from His Father; the destruction of Jerusalem was the revelation of this fact.

          In Matthew 24, therefore, Jesus was
          not prophesying that He would literally come on the clouds in A.D. 70 (although it was figuratively~ true).

          His literal “coming on the clouds: in fulfillment of Daniel 7, took place in A.D. 30, at the beginning of
          the “terminal generation.” But in A.D. 70 the tribes of Israel would see the destruction of the nation as the
          result of His having ascended to the throne of heaven, to receive His Kingdom.

          • Bill G Wilminton NC

            Blessed be those that come in the name of The Lord.

          • GSOB

            One of the last letters of the New Testament, the Book of Hebrews, was written to an entire Christian community on the very brink of wholesale abandonment of Christianity.

            The Christian Church of the first generation was not only characterized by faith and miracles; it was also characterized by increasing lawlessness, rebellion and heresy from
            within the Christian community itself, just as Jesus had foretold in Matthew 24.

          • Bill G Wilminton NC

            For I testify unto every man that heareth the words of the prophecy of this book, if anyone adds unto these things, God will add unto him the plaques that are written in this book.
            REVELATION

          • GSOB

            And?

          • Bill G Wilminton NC

            It is written that man shall not live by bread alone, but by every word that proceed out of the mouth of God.
            Mat 4:4

      • GSOB

        Hebrews 13:8, 9

  • Chaos no

    Yeah the red light for the last 6 months of 2015 that Michael put in place has now been moved to the end of next year. That figures.

  • Mondobeyondo

    Double-dip recession.
    First dip: 2008-2010 or thereabouts.
    Pause: 2011-2015
    Second dip: Now ~ ??

    Yes folks…two scoops of raisins, with every box of Raisin Bran.

    • Bill G Wilminton NC

      And the box is getting smaller and smaller……………

  • CharlesH

    I personally believe we’re in a recession right now – that we’ve never completely recovered from 08-09. That being said, if we’re not in a recession today – then we will be in 6 months and in a depression within 3 years absolutely. Their timelines may be correct but what they’re calling each one is folly due to trying to be politically correct and not alarmists.

  • Jazz

    Stocks were on sale today boys and girls. Buy on the dips! Oil is so cheap too. Loving it!

    • Watchman

      Oh look it’s the moron Zazz. Do us a favor and dip yourself into a bunch of Piranha’s and let us know how your dip went.

      • GSOB

        Stop picking on Jazz. He is a believer in Christ. Did you know that? And even if he wasn’t, you should build him up, lead him to the Lord.

        • Watchman

          You should take a dip in that Piranha’s as well GSOB then we can be rid of the troll and his comedic sidekick supporter.

          • GSOB

            LOL

    • MaxRockatansky33

      Too cheap oil is not good for the economy. US also produce a lot’s of petroleum from shale fractioning.

  • GSOB

    The Christian congregations immediately began calling themselves
    “synagogues” (that is the word used in James 2:2), while calling the Jewish gatherings “synagogues of Satan”- Revelation 2:9; 3:9). Yet they lived in anticipation of the Day of Judgment upon Jerusalem and the Old Temple, when the Church would be revealed as the true Temple and Synagogue of God.

    Because the Old Covenant system was “obsolete” and “ready to disappear” (Hebrews 8:13), the writer to the Hebrews urged them to have hope, “not forsaking the gathering of ourselves together, as is the habit of some, but encouraging one another; and all the more, as you see the Day approaching”

    (Hebrews 10:25. &
    2 Thessalonians 2:1-2).

  • GSOB

    The early Christians had to endure both severe persecution at the hands of apostate Israel and betrayal by Antichrists from their own midst who sought to steer the Church into the Judaistic cult.

    But this time of fiery tribulation and suffering was working for the Christians’ own blessing and sanctification
    (Romans 8:28-39); and in the meantime, God’s wrath against the persecutors was building up.

    Finally, the End came, and God’s anger was unleashed.

    The great trib. has come and gone!
    Christ is on the throne.

    He will not fail. He is the God-Man who will carry out the economy of God.

  • Laura Cook

    just a thought maybe the ww3 scenario is to cover up the financial collapse

    • Bill G Wilminton NC

      Very possible…….

  • Rufus T Firefly

    You get recessions every 6 or 7 years. Always have, almost always will. But if you have the IQ of a doorknob, you prepare for it and look upon it as a buying opportunity. Instead of concentrating on “stock market crash” of 2008 like the tin foil nitwits do, you concentrate on “bull market of 2009 through today”

  • Michael Dubin

    It’s not that stocks haven’t got the message, they’re being manipulated by the Fed and Plunge Protection Team. And what’s all this recession talk when we’ve been in a depression since ’08?

  • Laura Cook

    dont forget the boy that cried wolf false alarm after false alarm then when the real alarm was given no one listened thinking it was yet another false alarm…also here in the uk we have a saying dont know if youve heard of it in the states? but it goes like this something totally unexpected happens and sometimes people say I NEVER SAW IT COMING but come it has

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