While some economists have dialed back recession expectations, the chief investment officer of the US’s second largest public pension fund sees signs of a looming downturn.
(Bloomberg) — While some economists have dialed back recession expectations, the chief investment officer of the US’s second largest public pension fund sees signs of a looming downturn.
“I still think there’s about a 50-50 chance we have a recession somewhere in the next two quarters,” California State Teachers’ Retirement System CIO Chris Ailman told Bloomberg Television on Friday, acknowledging that he’s been saying that for a year and has been “flat-out wrong.”
Corporate earnings have held strong along with equity returns, Ailman said. But there’s still an inverted US Treasury yield curve — a possible sign of an impending recession.
When interest rates climb as they have, he said, “somebody’s got to get hurt … But we’re not seeing the pain we would expect.”
Key measures of labor costs and inflation cooled Friday, fueling optimism that the US economy may be able to avoid a recession despite the Fed’s aggressive interest rate hikes over the past year.
More investors have recently been betting on a so-called soft-landing — where the Fed raises interest rates without triggering high unemployment and a recession.
Read More: Key Takeaways From Fed Decision to Raise Rates to 5.25%-5.5%
The Fed raised interest rates Wednesday to a 22-year high after pausing them last month. Chair Jay Powell kept his options open about whether the central bank would continue increasing rates, noting that economic reports tied to employment and inflation are due before the Fed meets again.
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