Eric Hovde Predicts

recession, stock market decline, and housing market decline. From December 19th (Newport Beach Independent):

• Economic Slowdown: The U.S. is likely to enter a recession, with consumers expected to deplete their savings, leading to only one potentially positive GDP quarter in 2024.

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• Corporate Downsizing and Unemployment: Anticipated downsizing in corporations may push unemployment rates up, though they are expected to remain below 5%.
• Federal Reserve’s Policy: The Fed might increase interest rates by another 25 basis points but will likely start reducing rates in mid to late 2024, with cuts not exceeding 75 basis points unless a global crisis occurs.
• Stock Market and Bond Market: The stock market is projected to experience a 15% sell-off within the next six months, followed by a moderate rally when rate cuts begin. The bond market, after three consecutive down years, is expected to see positive growth in 2024.
• Housing Market: Housing prices might decline by up to 10%, but limited inventory should provide some resilience.
• Commercial Real Estate: CRE values are expected to continue declining, with multifamily properties potentially underperforming after a decade of strong performance.

As I noted yesterday, median Survey of Professional Forecasters is for no quarters of negative growth, and nowcasts are for positive growth in Q2.Figure 1: GDP (bold black), May SPF median (light blue), GDPNow of 5/16 (blue square), New York Fed nowcast of 5/17 (green triangle), St. Louis Fed nowcast of 5/17 (tan square), all in bn.Ch.2017$, SAAR. Source: BEA 2024Q1 advance, Philadelphia Fed, Atlanta Fed, NY Fed, St. Louis Fed via FRED, and author’s calculations.Hence, the first prediction seems unlikely to turn out well.On unemployment, unemployment is predicted by the SPF to rise, but to far below 5%.Figure 2: Unemployment rate (bold black), and May SPF median forecast (light blue), both in %. Source: BLS, Philadelphia Fed.What about the 15% selloff? It’s unclear what the 15% is off of; I assume it’s the level in December of 2023. Here is plot of the S&P500 and what the S&P500 needs to be in June to match Hovde’s prediction.Figure 3: S&P500 (bold black), and Hovde’s prediction (red square). May observation is through 16th of May. Source: FRED, and author’s calculations.Finally, what about the housing market? The 10% price decline is for 2024, so I assume the 10% decline is off December’s level.Figure 4: S&P Case Shiller 20 City house price index, s.a. (bold black), and Hovde’s prediction (red square). Source: FRED and author’s calculations.More By This Author:One Year Ahead Inflation Expectations for 2025Recession Probabilities In Light Of The Ever-Receding Recession May SPF GDP Forecast