Recession fears in the United States rocketed after a spot on the yield curve inverted for the first time in 12 years in the latest forecasts published last week. Investment management expert Ray Dalio claimed there is a “40 percent” chance the US will go into a recession in the middle of President Donald Trump‘s re-election bid next year. Speaking to CNBC, Mr Dalio said: “I think that in the next two years, let’s say prior to the next election, there’s probably a 40 percent chance of a recession.
“In an evolutionary way, over the next one-two-three years there will be a turn for the worse.
“There will be an environment in which you are going to have excess capacity and debt restructuring and political issues entering into it.”
The investment manager claimed the US Presidential Election could play a pivotal role in the future of the American economy, and influence the chances of a recession hitting.
He continued: “The election that we’re going to have in the United States will have an important bearing – it is a contrast, a conflict between the capitalist and the socialist. We’re going to see more of that.
“There is going to be a risk for capitalism and we need to monitor that.”
The gap between US two-year and 10-year Treasury yields – a closely watched metric for signs of a slowdown – fell to less than a basis point after shrinking last week to its narrowest since June 2007.
Bank of America strategist Stephen Stuttmeier warned the US economy is on “borrowed time” before a recession happens.
Mr Stuttmeier said: “The US equity market is on borrowed time after the yield curve inverts.”
President Trump however dismissed concerns of an upcoming slowdown, insisting the US is doing “tremendously well” despite an ongoing trade war with China.
The US leader told reporters on Sunday: “I don’t think we’re having a recession.
“We’re doing tremendously well. Our consumers are rich. I gave a tremendous tax cut, and they’re loaded up with money.”
Economic uncertainty globally is impacting the markets, with the US-China trade war, Germany’s GDP loss and Brexit contributing to investor worries.
Arthur Cashin, director of floor operations for UBS Financial Services at the New York Stock Exchange said: “The periods of boredom have grown shorter and shorter – and the terrors last a bit longer.”
Markets are not concrete at predicting a recession, however, they dropped before the 2001 recession and at the beginning of the 2008 recession.