The U.S. economy is expected to roll over as early as 2018, according to one investment bank and the bank is urging investors to prepare that roll over.
“The US economy will in all likelihood slow down substantially: there is a limit to the rise in the participation rate and the employment rate; real wages are slowing down,” wrote Patrick Artus, chief economist at Natixis, on Tuesday. “Investors should therefore prepare for the consequences.”
A depreciating dollar, a market sell-off and a brief rise in interest rates, are included in the consequences of this slowdown, notes Artus.
Headquartered in Paris, Natixis is a French corporate and investment bank. According to its website, roughly $950 billion of assets re overseen by Natixis Global Asset Management.
The analyst also suggested a downward correction and called the current level of corporate investment “abnormally high”.
But the reactions and expectations are not so pessimistic for the more mainstream investment banks on Wall Street. According to the consensus estimate collected by Thomson Reuters, Wall Street foresees a positive 2.5 percent change in GDP in the third quarter year over year. On Friday before the bell, GDP number will be released by the Bureau of Economic Analysis.
Additionally, no recession is seen by all of the major banks.
The expectations were more bullish for the American people. Earlier this month, optimism about the economy hit an all-time high according to CNBC’s All-American Economic Survey. While a four-quarter average for every major economic metric in the poll is at a record 10-year high, forty-three percent of the public believes that the economy is in excellent or good condition.
By its prediction of a 3.9 percent annual global growth through 2020, probably sounding the most bearish on the U.S. economy among major firms is Goldman Sachs. However, the firm also believes that over time, that U.S. growth will decelerate to just 1.5 percent annually.
A hot topic in national politics as well has been the economic growth of America. Calling for new tax cuts to push output higher, the 3 percent growth target as a cornerstone of his economic plan has been repeatedly touted by the U.S. President Donald Trump.
“You’re not going to get 3 percent [economic] growth in 2018 if you don’t get [tax reform] done in 2017”, said Republican House Speaker Paul Ryan in September.
Natixis has a warning for clients in the note, “If US growth slows down markedly … equity valuation and share prices will start falling.”
(Adapted from CNBC)