'Right Around The Corner' — Economist Steve Hanke Predicts Recession, Deems Stocks 'Pretty Pricey'

Renowned economist Steve Hanke warns of an imminent recession, indicating that stocks are overpriced and expected to return less than bonds.

What Happened: Hanke, a professor of applied economics at Johns Hopkins University, anticipates a recession in the first half of 2024. He points out a negative equity risk premium, resulting from surging Treasury yields and stock prices, which signals that stocks are “pretty pricey,” Business Insider reported.

“With lower inflation and a recession right around the corner, I anticipate that the 10-year yields will come down and the gap will close,” Hanke said.

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Hanke, also known for his role as the president of Toronto Trust Argentina in 1995, noted the housing market is experiencing a shortage due to a lack of inventory and insufficient construction of new homes over the last 15 years. This, he suggests, will keep house prices high due to unmet demand.

Hanke warned of a significant decline in the money supply, contracting at a rate of -3.7% annually, unseen since 1938. He said this could potentially stifle economic growth. The economist also expects inflation to drop to about 2% by the end of the year.

He further cautioned investors about the potential market turmoil and recession, urging them not to “sleepwalk” into these scenarios.

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