So, Are We Getting A Recession? Top Economists And Money Managers Weigh In: 'Time Is On Your Side'

As Wall Street recovers from its worst single-day plunge since 2022, many wonder if a recession is on the horizon.

Despite market jitters, top economists and money managers are resisting recession calls, suggesting that while headwinds are real, the soft landing the Federal Reserve wants remains the most likely scenario.

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“Time is on your side,” says Carson Group’s Chief Market Strategist Ryan Detrick. In a report issued, Detrick said that 2024’s market performance isn’t far off from historical norms despite recent volatility. “Since 1980, the average year sees a peak-to-trough move of 14.1% and gain of 10.3% for the year,” he said. “As of Monday, the S&P 500 had pulled back 8.5% from the mid-July peak and was still up a solid 8.7% for the year.”

The chief market strategist noted that Monday’s market turbulence came from a trio of factors: concerns over the economic slowdown, the unwinding of the yen carry trade following a surprise rate hike by the Bank of Japan, and speculation that the Fed may be behind the curve on rate cuts.

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Friday’s jobs report, which showed the unemployment rate ticking to 4.3%, triggered alarm bells for some investors. The uptick activated the “Sahm Rule,” named after economist Claudia Sahm, which has historically signaled the onset of recessions.

However, many economists argue that this time might be different. Moody’s chief economist Mark Zandi remains optimistic, telling CNBC, “I think far and away the most likely scenario is a soft landing: The economy avoids an economic downturn.”

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Jay Bryson, Wells Fargo’s chief economist, agreed, though he told CNBC that the concerns aren’t unfounded. “I think the fears are real; I wouldn’t discount them.” Still, he said that a soft landing remains his “base case” forecast.

Both Zandi and Bryson said that avoiding a recession would require the Fed to start cutting interest rates soon. The central bank has signaled it could reduce rates as early as September, a move that most market watchers now see as increasingly likely.

Interestingly, some traditional recession indicators may be less reliable in the current economic landscape. The rise in unemployment, for instance, appears largely driven by an influx of workers into the job market rather than widespread layoffs. 

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“This is due to how the unemployment rate is calculated," the CNBC report explained. "The unemployment rate’s rise over the past year is largely for ‘good reasons’ – specifically, a big increase in labor supply.”

Positive indicators persist. Consumer spending remains high and household finances are generally healthy. "At this time we don't expect a recession as this is more likely a growth scare, which isn't uncommon," Detrick explained in his report.

As markets digest conflicting indicators, Detrick’s advice to investors is simple: “It is about time in the market, not timing the market.”

For now, while recession fears may be driving headlines, the consensus among top economists seems to be one of cautious optimism. 

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