Bank Of America Survey Predicts US Recession In Next 12 Months

Bank of America Merrill Lynch
The Bank of America building is shown in down town Los Angeles, California (Photo: Reuters / Mike Blake)

The current geopolitical climate has caused investors some concern over the fate of global markets, particularly in the United States. A recent study conducted by Bank of America Merrill Lynch has shown that over a third of investors actually think that the US could plunge into recession in as little as 12 months.

The survey of fund managers throughout the country has shown that recession fears are actually now at its highest level in over eight years, the highest recession probability since 2011. Majority of the investors are now slowly shifting into safer forms of investments such as bonds and gold, with most shying away from traditional equities.

According to the bank's August Fund Manager Survey, the effects of the trade dispute between China and the United States is cited as the main reason for the heightened recession risk. With the global policy stimuli now at a 2.5-year low, all eyes are now on global central banks, particularly those in the UK, China, and the United States, and their possible actions to combat the bearish climate.

The survey that was conducted by the bank included over 224 panelists that managed a total of $553 billion in assets. Majority of the panelists believe that most people have underestimated the toll that has been brought onto the global economies by the trade war.

Following the survey, the Bank of America Merrill Lynch updated its recession probability forecast and stated that there is now a one in three chance that the US will plunge into a recession sometime in the next 12 months.

Prior to the bank's updated forecast, other asset management firms had also downgraded their economic forecasts seemingly foreshadowing the Bank of America's findings. Goldman Sachs announced last week that it has lowered its 2019 US economic growth forecast from 1.8 percent to 0.2 percent.

Goldman Sachs' analysts also cited recession fears as the main contributing factor for the recalculation. Similarly, UBS cut its gross domestic product growth forecast for both the US and China citing that the trade war will have a heavier toll on the economies than initially expected.

The trade war between China and the United States has now dragged on for more than a year, with both countries issuing restrictions and negatively impacting trade policies against each other. The tit-for-tat moves have plunged global markets, which have been reacting accordingly with each and every decision.

US President Donald Trump's earlier threat to impose added tariffs on over $300 billion worth of Chinese products had sent stocks downward. Markets then rallied when the US announced that it would be postponing the initially planned tariffs to a later date. The up and down movements are expected to continue, but the overall trend has still sent markets in the red overall.

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