From the FXWW Chatroom – BofAML’s Chief US Economist, Michelle Meyer, now assigns ~33% probability of a recession in the US over next 12 months. Our official model has the probability of a recession over the next 12 months only pegged at about 20%, but our subjective call based on the slew of data and events leads us to believe it is closer to a 1-in-3 chance. Michelle provides a roadmap for gauging the risks of a recession, , flagging the indicators that tend to be most predictive (economic and financial) and identifying the typical turning points in history. Michelle compares today’s US economy vs that of 2012 and 2015 when it flirted with a recession.
She believes that the economy will not be as lucky this time around for a few reasons:
1) later stages in the cycle – the economy has returned to full capacity and we no longer have “easy growth”;
2) monetary policy tools are limited;
3) there is a persistent external shock hitting the global economy – the trade war – creating high uncertainty across the global economy.