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Societe Generale sees US recession fears credible

Societe Generale sees US recession fears credible

Mubasher: Global economic growth is getting a harder blow than many expected, while fears of a looming US recession now seemed more justified, according to Societe Generale.

The US Federal Reserve’s dovish pivot should raise doubts over the last stage of this cycle will develop, with investors likely to witness profit warnings, defaults and heightened volatility over the next 12 month, Bloomberg said, citing a report by Europe’s top-ranked strategy team at the French bank.

The impact to economic growth momentum and earnings appears to be real, SocGen’s global asset allocation head Alain Bokobza said, adding that “this time, easy monetary policy may lack the strength to turn the tide and avoid a recession.”

Two leading economic factors indicate a slower growth: The US yield curve, usually used as a recession predictor if inverted, and the less widely cited gauge of news sentiment, according to the SocGen team.

The latter model traces articles on economic performance as a percentage of all media stories and usually moves at least three months ahead of a parallel shift in global industrial production data, the report said.

“Currently, our US economic newsflow indicator is at levels that count among the 7% lowest readings since 1998,” the team said in the report.