Don't rule out a 'hard landing' for the US economy and that means it's still 'tough going' for stocks, forecaster says
MJgraphics / Shutterstock
- A 'hard landing' for the US economy is still in the cards as leading indicators suggest it's not out of the woods yet, an ECRI forecaster says.
- The upturn in economic data earlier this year was 'a flash in the pan,' Lakshman Achuthan told CNBC.
- The downbeat economic outlook means stocks will continue to struggle, according to him.
The US economy still faces the risk of a `hard landing' - or a sharp and disruptive downturn - despite some upbeat data that was reported earlier this year, according to a top forecaster at the Economic Cycle Research Institute.
The ECRI's weekly leading index - which anticipates emerging economics trends based on government data, surveys and market prices - is currently signaling a potential weakening of activity in the world's largest economy, Lakshman Achuthan, the institute's co-founder, told CNBC Wednesday.
A set of strong economic data that came in earlier this year, including January's job numbers and retail sales, now appears to have been a "flash in the pan", he said.
"The weekly leading index's level is coming back down. For there to be an end through our hard landing outlook - which would be kind of looking at the bottom of the business cycle in a recession - that indicator really has to make a pronounced pervasive and persistent upturn. We're not there yet," Achuthan said.
"We're seeing lots of symptoms [of a significant downturn] when you have crises," he told CNBC Wednesday.
And that suggests it's still too early presume that the stock market isn't vulnerable anymore to the risk of further declines, he added.
US equities have made modest gains this quarter after the biggest selloff since the 2008 financial crisis last year. The S&P 500 index is up by more 5% so far in 2023, after an almost 20% slump in 2022.
"Stocks typically bottom less than six months before the end of recession. But if there's no end of recession or no bottom in sight. I think it's still tough going for stocks for the time being," he said.