Investing Pioneer Predicts 50% Chance Of Downturn In 2024: 'Recessions Always Start With An Economy That's Been Booming'

The U.S. economy has experienced its most robust quarter since 2021, but investment pioneer, Rob Arnott, remains skeptical about the sustained growth into the new year.

What Happened: Arnott, the founder of Research Affiliates and a leading voice in ‘smart beta’ investing, challenges the optimistic outlooks of Wall Street analysts who see no impending recession, reported Business Insider.

He also countered the common belief, stating, “People will say that recessions don’t start with a booming economy. That’s not true. Recessions always start with an economy that’s been booming.”

See Also: Peter Schiff Issues Dire Warning Amid Rising Treasury Yields, Cites 1987 Stock Market Crash: ‘The Current Rate Rise Is A Much Greater Risk’

As per a recent Bloomberg poll, forecasters gave a 55% probability of a recession within the next year. Arnott sees the recent bond market volatility as a cautionary signal, even though the stock market seems to be weathering it well as of now. He estimates a 50-50 risk of recession or bear market in the upcoming year.

Arnott warned against growth stocks, citing two main factors: their vulnerability due to inflated valuations and the impact of persistent inflation. He argued that these conditions favor value stocks, which offer a greater safety margin.

He concluded, “There’s a couple of headwinds that play against growth and in favor of value. One of those is relative valuation. When the spread in valuation between growth and value gets enormously wide, any mean reversion will work in your benefit if you’re a value investor.”

Read Next: Bond Markets Echo Volcker Era With Soaring Yields — America Suffered 2 Recessions Last Time They Were This High

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