The U.S. economy stands a 31% chance of double-dipping into recession in the next year, based on the average of the predictions by economists, CEOs, chief investment officers, portfolio managers and chief strategists of some of the world’s largest traditional and hedge fund managers.
Collectively, their companies manage $7.2 trillion.
Despite an Aug. 27 promise by Federal Reserve Chairman Ben S. Bernanke that the U.S. central bank “will do all that it can” to keep the country’s economic recovery on track, negative sentiment ran high among the senior money management executives invited by Pensions & Investments to give their views for a story that will appear in the Sept. 6 issue of P&I.
The vast majority put the odds of a double dip during the next 12 months at 25% or higher. Just 21% said the chance was 20% or less.
Joseph H. Davis, chief economist and head of the investment strategy group at Vanguard Group, said his 35% prediction of a double-dip recession “is uncomfortably high. I’ve rarely seen the chances of a double dip this high at this stage of a recovery.”
The most bearish prediction — “way over 50%” chance of a double dip — came from Robert Arnott, chairman of Research Affiliates.
Robert L. Reynolds, president and CEO of Putnam Investments, was the most optimistic, putting the odds at just 10%.
Philip A. Falcone, CEO and founder of hedge fund firm Harbinger Capital Partners put the odds of the U.S. economy double-dipping at 25%.
“This may be one of the toughest parlor games around,” Mr. Falcone said in an e-mailed response to questions. “The macro picture in the U.S. feels balanced around a ‘flat-ish’ GDP rate of change. Unemployment appears to have bottomed at a level that challenges growth and now looks as though it isn’t likely to move much in either direction in the short term. Political and regulatory uncertainty is restraining corporate America’s appetite to deploy very significant cash balances, muting `private sector stimulus.’”