A new home lot is for sale as construction begins on additional homes in a new community in Glassonville, Maryland, January 19, 2023.
Jim Watson | AFP | Getty Images
This report is from today’s edition of CNBC’s Open Daily, our new international markets newsletter. The CNBC Daily Open keeps investors up-to-date with everything they need to know, no matter where they are. Like what you see?you can subscribe here.
what you need to know today
recession warning
HSBC Asset Management said the U.S. will slip into a recession in the fourth quarter of this year and continue into recession in 2024. In addition, the euro area will also experience economic contraction next year, as will the United States. The silver lining to this forecast: Inflation will fall rapidly, with HSBC expecting the Fed to cut rates by the end of the year.
higher rates, longer
European Central Bank President Christine Lagarde said inflation in the euro zone remained “too high and will persist for too long”. Headline inflation in the region was 6.1% in May, down from 7% in April but still three times the ECB’s 2% target. Lagarde warned that the ECB is unlikely to pause interest rates anytime soon, let alone cut them.
Fourth Industrial Revolution
Dan Ives, managing director at Wedbush Securities, said generative AI was not hype but that “the fourth industrial revolution is underway”. Ives believes AI will change the way we live and work, and that it has ushered in “the start of a new technology bull market”.In a separate related report, Unity shares rose more than 15% after the company went public launched a market for artificial intelligence software.
(PRO) Seth Klarman on the Market
Legendary investor Seth Klarman of the Baupost Group did an exclusive interview with CNBC on Tuesday. Two highlights: Klarman identifies one of the most common mistakes ordinary investors make when buying index funds, and points to a “hunting ground” for investors looking for opportunities. Watch the full interview here.
the bottom line
Recession, recession, recession. The phone is so loud that you can hear it even if you cover your ears.
Joseph Little, global chief strategist at HSBC Asset Management, said: “The upcoming recession scenario will be more like the recession of the early 90s, and our core scenario is a decline in GDP of 1-2%.”
Marko Kolanovic, Chief Strategist at JPMorgan Chase: “Given the economic deceleration and possible recession from 4Q2023/1Q24, we expect a more challenging backdrop for equities.”
“The Fed’s goal is to reduce the heat in the economy, and one of the ways to do that is to trigger some kind of recession … so that could be an early 2024 event,” said Seth Klarman, CEO of Baupost Group.
However, the latest economic data from the U.S. shows that the U.S. economy is resilient and, with luck, may end up overturning these forecasts.
consumer confidence The increase exceeded expectations, reaching the highest level since January 2022; the proportion of respondents expecting a recession fell by four points (but still up to 69.3%).
The housing market, often an early indicator of a downturn, has also shown surprising strength. new home sales It rose 12.2% in May from April, while economists had expected a 1.2% decline. House prices rose 1.3% month-on-month in April, according to the closely watched Case-Shiller index.
need durable goodsBig purchases that typically require long-term payments, such as televisions and transportation equipment, accelerated 1.7 percent in May. That was faster than the 1.2% increase in April and far more than the 1% decline expected by Dow Jones.
All this data suggests that U.S. consumers have not yet caved in to rising interest rates and a (ostensibly) bleak economic outlook.
If Wolf Research’s chief investment strategist Chris Senyek’s forecast that “the U.S. consumer will be the No. Make the U.S. economy recession-proof, despite the unanimous voice. Forecast one.