- Chris Watling, Chief Executive of Financial Planning at Longview Economics stated that a recession is coming
- The Potential and Risks of the United States economy from Watling’s perspective
- The main US economic index lost 1.2%, its lowest decline since November 2020
Jakarta, CNBC Indonesia – Longview Economics’ chief executive financial planner, Chris Watling, said the latest US economic data showed a potential recession and investors needed a strategy to deal with a falling stock market.
Chris Watling stated on CNBC’s “Squawk Box Europe” program on Friday (21/04/2023) that he believes a recession is on the way, citing his statement that “pretty interesting” and “very bad” key economic indicators.
The main US economic index fell 1.2% in March 2023, dropping to its lowest level since November 2020. The data suggests economic weakness may soon escalate and spread across the United States.
Watling also gave a warning signal that the chronology of recession occurs after the inversion of the treasury yield curve experienced its first reversal in March 2022 in a period of one year or more.
“Each time it happens, the United States is going to have a recession. So, I think it’s coming. It’s only a matter of time,” Watling said.
While many economists had warned of a recession looming, the IMF was surprised by data on strengthening US labor markets and consumer spending.
The IMF has released its latest World Economic Outlook report on Tuesday (11/4/2023) that the world’s largest economy experienced growth of 1.6%, above the forecast of 1% in 2022.
Gita Gopinath, deputy managing director of the IMF, told CNBC’s Joumanna Bercetche that signs of falling inflation data have given reason to believe the US economy can avoid a recession. However, a market crash is still possible.
Overly optimistic earnings performance expectations
Watling said the economic downturn would not go unscathed. The reason is that profit margins experienced record highs in 2022 and increased slightly in 2022.
This increase is easy to obtain during inflation, so that companies gain flexibility in managing funds for operations. Profit records will of course be easier to obtain.
However, the onset of the recession took a hit to profit margins. The limited money supply will bring income back to normal. Therefore, a market that is in optimistic expectations will face a fall at some point.
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