Ed Yardeni’s latest newsletter also has a nice summary of the bearish economists on Wall Street. It all comes down to the outlook on consumer spending.
Is a consumer-led recession likely in 2008? While most economists aren’t forecasting one, we have all been raising the odds of such a downturn. I am at 30%. Moody’s is at 40%. Alan Greenspan and Marty Feldstein are at 50%. There are a few economists who have crossed over to the dark side. Pimco’s Bond King Bill Gross thinks a recession might have started in December, but should last no more than six months as the Fed is forced to continue cutting the federal funds rate. Pequot’s strategist Byron Wien agrees, and so does Steve Roach. David Ranson thinks it may be imminent based on the recent widening of credit quality spreads in the bond market… At the end of last year, Merrill’s David Rosenberg concluded that the probability of a recession is 100%. He based his sure-thing forecast on a modified version of a yield curve model developed and tracked by economists at the Federal Reserve Bank of New York. More recently, he said that depending on which econometric model or indicators are used in a forecast, the probabilities for a recession currently are anywhere from 50% to 100%.
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