Recession fears are alive and well on Wall Street. With $8 trillion in value wiped out of global stocks in the past month and a number of economic indicators flashing warning signs, bank analysts have trimmed their growth estimates and upped the risks that a recession could occur in 2016.
On Friday, Bank of America analysts Ethan Harris and Emanuella Enenajor raised the odds of the economy suffering a recession this year to 20 percent. Although a downturn on the order of the 2008-09 recession is a “big stretch,” the analysts said, financial market conditions have deteriorated enough to warrant the higher probability. At the same time, they cut their projection of U.S. economic growth to 2.1 percent, from 2.3 percent.
Analysts at Citigroup sounded a similar note Thursday. “A global growth recession is far from assured, but financial markets seem to be on their way to pricing one in,” they wrote. At Morgan Stanley, analysts also computed a 20 percent risk of recession in 2016, noting: “The risks are skewed to the downside and appear to have risen recently.”
Recessions are generally defined as two straight quarters of economic contraction.