Market optimism on Fed rate cut clashes with Deutsche Bank’s recession warning

by | Dec 23, 2023 | Recession News | 29 comments

Market optimism on Fed rate cut clashes with Deutsche Bank’s recession warning




TrendMacro CIO Don Luskin and NewEdge Wealth CIO Cameron Dawson discuss whether the Fed could lower interest rates as soon as the first quarter of 2024 on ‘Making Money.’
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Deutsche Bank’s recession warning clashes with market optimism on Fed rate cut

The global economy has been on shaky ground for some time now, with trade tensions between the United States and China, political uncertainty in Europe, and slowing growth in major economies all contributing to fears of an impending recession. Deutsche Bank’s recent recession warning has only added fuel to the fire, but the market seems to be clinging to optimism in light of the Federal Reserve’s recent rate cut.

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Deutsche Bank, one of the largest financial institutions in the world, recently issued a warning that the world economy is at risk of slipping into a recession. In a report titled “The Next Recession: Implications for the Global Economy,” the bank’s analysts highlighted several key risk factors, including the ongoing trade conflict between the US and China, as well as political instability in Europe and elsewhere.

According to the report, the likelihood of a recession in the next 12 months is now at a concerning 60%, based on a range of economic indicators. This gloomy forecast has sent shockwaves through the financial industry and has prompted many investors to reassess their risk exposure.

However, despite these warnings, the market seems to be relatively optimistic in the wake of the Federal Reserve’s decision to cut interest rates by 0.25% at the end of July. The rate cut, which was the first in over a decade, was seen as a signal of the central bank’s willingness to support the economy and prevent a potential downturn.

In response to the rate cut, US stocks surged to new highs, with the S&P 500 and the Nasdaq both reaching record levels. This apparent disconnect between Deutsche Bank’s recession warning and the market’s reaction to the Fed’s rate cut has raised questions about the true state of the global economy and whether the market is overestimating the impact of the central bank’s actions.

Some analysts have argued that the market’s optimism may be premature, given the numerous underlying risks and challenges facing the global economy. Despite the Fed’s rate cut, concerns over trade tensions, geopolitical uncertainties, and slowing growth are still very much present. If these challenges are not effectively addressed, they could undermine the effectiveness of the rate cut and push the economy closer to recession.

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On the other hand, supporters of the market’s optimistic outlook point to positive developments such as strong consumer spending, low unemployment, and a rebound in manufacturing activity in some economies. They argue that these factors, coupled with the Fed’s proactive stance, could help to extend the current economic expansion and stave off a recession.

In the midst of these conflicting viewpoints, it is clear that the global economy is facing a period of significant uncertainty. Whether Deutsche Bank’s recession warning or the market’s optimism ultimately proves to be more accurate remains to be seen. In the meantime, investors and policymakers will have to navigate through a complex and volatile economic landscape, bracing themselves for the possibility of a recession while also seeking opportunities for growth and stability.

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29 Comments

  1. @heathwirt8919

    U.S. economy growing faster than expected, Faux News – Gloom and doom.

  2. @Chriscrash1985

    The only reason we have positive GDP at all is because of the gross negligent overspending of this godless pedophile government.

  3. @Chriscrash1985

    These people should not be qualified to talk economics. It's f**** sad these people are so stupid. We're headed for a great depression worsening we've ever seen. Don't get that twisted Everybody needs to prepare

  4. @susangiggs

    Because recessions are a natural part of the economic cycle, your only option is to be prepared and make appropriate arrangements. When I began my career in 2009, there was a recession. My first job after college was doing aerial acrobatics on cruise ships. I founded my own company, work as a vice president for a large corporation, own three rental properties, invest in stocks and companies, and have seen my net worth climb by two million dollars in the previous four years.

  5. @tomaskot951

    Past experiences points that big rate cuts are happening when we are in recession. And everything is pointing towards the recession in 2024. Market is completly ignorant.

  6. @colbyharrington6166

    FHLB expires in March. Expect it. Banks won't be able to support themselves without the FED.

  7. @Heero-xn8rj

    Markets gonna gaslight. Whatever the government says, assume the opposite

  8. @alexprinsrealestateagent1263

    A cut in Q1 of next year seems too soon. I think we’ll see it in Q2. The FED is going to pound us for as long and as hard as he can.

  9. @tomhahn6077

    You guys need to pay attention how many times they revised their numbers 2 months later. On a job report on the, on the spending that people are doing. All of it is always getting revised. On every report Biden's committee has done they're all getting revised so they don't look that bad, and then you see the true numbers 2 months later. They're fabricating numbers like you never seen before. And when the curtains are pulled back to show the truth. We are going to be in the greatest depression of all times

  10. @rchen404

    Short whatever the hell this shrew recommends buying

  11. @pascalouellette8516

    No rate cuts until at least June inflation is still hanging around, we have been in a recession for close to 12 months…

  12. @TimothyTimothy-jp4ku

    The current economic system contributes to instability, inflation, and poverty. A new Creative Society economic model is required, one that can guarantee everyone's stability, security, and a high standard of living. But unfortunately, whenever the leaders we depend on appear on TV to tell us not to panic that everything is under control, that is actually the time to fear the most! Saddening…

  13. @headspaceandtiming2114

    So this is a 180 from a few weeks ago? Now it’s all good, soft landing, great outlook…
    Seems like a house of cards. Debt, inflation not dropping but “steady” and a rate cut is absolutely going to happen? What happened to higher for longer?

  14. @paulrevere5197

    Spending up? Sure, they forced us to spend more. We're not splurging, we're surviving…

  15. @richardprice8348

    Consumer spending is up only because we are paying more for everything and getting less for our money.

  16. @timchason1924

    Look at all these fake comments. Prpoganda people.

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    Doesn't matter if deflation market on stock will topple and stocks will pull and swiftly PLUNGE

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