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US Economy Slows: Recession Imminent or Mid-Cycle Shift?
23 Dec
Summary
- US economy shows signs of losing momentum, but a recession isn't guaranteed.
- European equities are expected to outperform US stocks heading into 2026.
- Concerns remain over US debt sustainability and inflationary risks.
The U.S. economy is experiencing a slowdown, characterized by cooling job creation. Market strategist Ben Gutteridge from Invesco suggests this may be a mid-cycle adjustment rather than a precursor to a recession. He foresees a period of low hiring and firing, potentially supported by future monetary easing, which could allow U.S. equities to perform well through year-end.
Invesco anticipates European equities will outperform U.S. stocks by 2026. This outlook is bolstered by expectations of a weakening U.S. dollar, European Central Bank rate cuts, increased bank lending, and planned stimulus. Attractive valuations in Europe further contribute to this positive forecast, presenting an "underappreciated story" for investors.
Despite optimism for Europe, risks persist in the U.S. Potential cuts to tariffs, taxes, and interest rates could stimulate growth but may also fuel inflation and raise concerns about U.S. debt sustainability. Gutteridge also noted ongoing tariff tensions impacting Europe's auto sector, though he believes the EU will maintain a working relationship with China.
