Asset manager Michael Yoshikami thinks there’s a 60% chance that the United States will fall into recession as talk about a possible recession continues to grow. Yoshikami explains the reasons and shows if the stock market is at its lowest point. Yoshikami, CEO of Destination Wealth Management, believes the U.S. economy has begun to show signs of slowing down — and says an overly aggressive Fed could tip the economy into a recession. CNBC interviewed Yoshikami on Friday. He noted softening conditions in the labor markets and said that prices for used cars, which had previously soared to the top, have started to drop. Yoshikami also worries about the weakening housing market. Yoshikami stated that people are beginning to notice the higher interest rates, as mortgage rates have increased a lot. The most affected by interest rate changes has always been the housing market. Housing market signs have begun to slow down after the Fed raised borrowing costs to curb domestic demand. Data from the U.S. Commerce Department suggested that demand for housing was cooling, as sales of new U.S. single-family homes plunged to a two-year low in April — its fourth-straight monthly decline. The data also showed that sales of homes previously owned continued to decline. Yoshikami fears that the Fed may be too aggressive to combat inflation against this background. We are worried that the Fed will be too aggressive. They won’t let the economy go a bit before trying to manage inflation. They are going to use a hammer to smash it. It could cause a severe recession if that happens,” he stated. This is what it means for consumers. People are reluctant to spend their money in this economic storm. He said that everything is rising, and food prices also are increasing. But I believe the biggest thing in the U.S. is energy prices. California’s gas costs $6-7 per gallon. He said that it used to be $50 to fill up your tank. It now costs $100. “That is definitely a tax on consumers and that will impact consumer spending.” Yoshikami stated that this might have ripple effects on jobs and production. Yoshikami noted that Americans spend 70% of their money on consumer goods. A significant drop in consumers spending could lead to lower production and layoffs. He believes the next 60 to 90 days will be crucial is determining the direction of the economy for the next 12 months — with the upcoming labor reports providing clues on the state of the economy. Read more Hedge fund manager Dan Niles explains why we are still in a bear market rally Dan Niles sees more pain in tech — and reveals an opportunity in the sector Two notable Wall Street strategists say this is just a bear market bounce Nearing the bottom Yoshikami believes the current weakness in the stock market is largely due to valuations, rather than on expectations of an aggressive rate hike cycle. Market watchers are reluctant to put a stop to the massive equity selloff this year. Yoshikami says the bottom of the market is closer than most people believe. “I believe that valuations have fallen significantly. Because of this, I feel that the bottom is nearer than people believe. “I think that we are closer to bottom than when we were at the peak of the downturn, as I believe that valuations are becoming more reasonable,” he stated.
Near the New York Stock Exchange (NYSE), in New York City on May 4, 2021, you can see the Wall St. sign.
Brendan McDermid | Reuters
Asset manager Michael Yoshikami thinks there’s a 60% chance that the United States will fall into recession as talk about a possible recession continues to grow. He discusses why, and whether the market’s bottom has been reached.
