According to the CEO of Bank of America, most people won't even notice the slight recession

Today we do not see many positive scenarios. As time goes on, more and more analysts and investors are beginning to lean towards a deep recession scenario. However, according to the CEO of Bank of America, this may not be so drastic. How does he see the situation?

Recently, nothing has been discussed other than the question of a recession, or what form it will take. Most people agree that the US will not go into recession. But the question is still how bad it will be. At the moment, there are two groups. The first, more numerous group expects a so-called hard landing, and the second, less numerous group expects a so-called soft landing.

https://www.youtube.com/watch?v=sTUh-NQ7q3E

And what exactly is a hard landing and a soft landing? For newcomers, here's a definition.

A hard landing refers to a significant economic slowdown or downturn after a period of rapid growth. The term "hard landing" comes from aviation, where it refers to a type of high-speed landing that - while not an actual crash - is a source of stress as well as potential damage and injury. This metaphor is used for fast-growing economies that encounter sudden and sharp controls on their growth, such as monetary policy intervention to curb inflation. Economies that often experience a hard landing slip into a stagnant period or even a recession.

Asoft landing in an economy is a cyclical slowdown in economic growth that avoids a recession. A soft landing is the goal of a central bank when it tries to raise interest rates just enough to stop the economy overheating and high inflation, without Soft landing can also refer to a gradual, relatively painless slowdown in a particular industry or economic sector.

While many analysts and investors are expecting the first scenario Bank of America CEO Brian Moynihan is going against the tide and expecting the second scenario, the soft landing scenario.

They're going to have to hang in there for a long time because frankly, the job market is still very tight, despite what you hear about layoffs. And financial conditions are strong, so companies have access to capital, albeit at a higher cost.

According to Moynihan, the Fed will have to keep interest rates high for longer than expected, which is already evident, and many investors are already counting on that. But on the other hand, he thinks the Fed's policy will not have the consequences many expect. On the contrary, they think that people will not even notice this "shallow recession".

Our baseline projection is that a recession in the U.S. economy will occur from the third quarter of 2023, to the fourth quarter of 2023, or the first quarter of 2024. The economy will contract by 0.5% to 1% each quarter, leading to a "very mild recession in the scheme of things."

The main reason, according to Moynihan, is that people are sufficiently prepared, and still have money in their accounts. Here, this cash, and people's preparedness, according to Moynihan, will cause the recession to be very shallow and short, and most people won't even notice it properly. So he expects only a so-called technical recession.

So it is not that Moyinihen does not expect a recession at all. Of course, he does expect a recession, but it will be a so-called technical recession. What does this technical recession actually mean? The term technical recession is used in cases where the definition of a recession is met, but people do not actually feel it. Let's take an example.

A recession is defined as a fall in GDP of two or more consecutive quarters. Let us take a simple example. You are working and your salary is 30 000 crowns. Suppose you spend only 20 000 kronor of that 30 000 kronor, and you have 10 000 kronor left over. In the following quarter your wages will fall by 500 crowns, and in the next quarter your wages will also fall by 500 crowns. For example, this may be a temporary reduction for some reason. that is, after these two quarters you do not have a salary of 30 000 crowns, but temporarily only 29 000 crowns. This means that you still have 9,000 crowns left in your account. This means that your salary has been reduced, but not so radically that you have to deal with it or feel it in any way. So this is called a technical recession.

So, as we can see, the technical recession is not such a big deal. What is worse is when this technical recession turns into a real recession, when ordinary people start to feel it. But this is not going to happen, according to Moyinihan. This is because of the amount of cash that ordinary people have in their accounts. Americans, in short, are counting on the worst, and have begun to build up reserves.

WARNING: I am not a financial advisor, and this material does not serve as a financial or investment recommendation. The content of this material is purely informational.