Control Panel: forecasting recession

Despite Easing Price Pressures, Economists in WSJ Survey Still See Recession This Year

Forecasters put 61% probability of recession in next 12 months

By Harriet Torry and Anthony DeBarros, The Wall Street Journal, Jan. 15, 2023

On average, 71 business and academic economists polled by the Journal put the probability of a recession in the next 12 months at 61%… three-quarters of respondents said the Fed wouldn’t achieve a soft landing this year. … While economists don’t think a recession can be avoided, they expect it to be relatively shallow and short-lived, in line with other recent surveys… [end quote]

The WSJ banner in the graphic above blocks the bar which shows that 31% of the economists think the Fed will begin to cut in 4Q23.

The Fed has said clearly that they do NOT expect to cut the fed funds rate in 2023. But look how half the economists don’t believe the Fed about its own policy. The stock and bond markets are acting the same way – they don’t believe the Fed.

All the stock market trends are bullish for early 2023. This hardly looks like a stock market that expects a recession.

The market is moving from neutral into a risk-on stance as stocks and junk bonds are rising relative to the UST. The Fear & Greed Index is in Greed.

The entire yield curve has dropped except for the short end which is controlled by the Federal Reserve raising interest rates. The markets believe that the Fed will succeed in bringing inflation down to its target of around 2%. But the markets think this will happen without a serious recession.

The USD continues to fall. Gold and copper are rising. Copper is rising faster than gold, a “mungofitch ratio” that could indicate faster economic growth if it persists – but it’s just noise unless a longer trend appears. Oil is bouncing around in a channel. Natgas is plunging.

The METAR for next week is sunny. The markets (stock and bond) have shrugged off old bad news for the time being. There isn’t any new bad news on the horizon this week.



No replies, so will add one on this nicely on-topic post.

Why should economists and the market stringently adhere to the Fed’s projections looking ahead about a year from now when the Fed has not been accurate in forecasting its own policy?

It seems reasonable that economists and investors perhaps run their own numbers with their own models and inputs (or maybe some fingers to the wind) and get different answers than the Fed.

Also, the Fed can change its view at any time as they say repeatedly that their decisions will be data dependent. So, bond yields that are years out may not differ significantly from what the Fed actually does as an example. Maybe the economists and markets are also acting in a data dependent way (I would think so).


The FED is putting information with the bankers and corporate planners to calculate the IRR for their corporate plans. The FED has to telegraph that information well in advance to have an impact. Herky jerky movements by the FED are worthless as policy. The planners wont do anything sudden changes.

I think the FED wont reverse course at all. I think interest rates are normalizing with a modestly higher corporate tax and top bracket income tax in 2023.

The FED might make a small rate cut or two in 2024.

Frankly 2024 might be so good it is unnecessary to cut rates at all.