JPMorgan Outlines 4 Global Outlook Scenarios — Warns of 'Boil the Frog' Recession as Global Downturn Looms

Global investment bank JPMorgan has presented four probable global outlook scenarios, with “boil the frog” recession emerging as the most likely outcome. The bank’s economists warned: “Broad-based developed-market tightening points to a more synchronized global downturn sometime in 2024.”

JPMorgan’s Global Outlook and ‘Boil the Frog’ Recession

Global investment bank JPMorgan has provided an overview of four potential global outlook scenarios that it expects to unfold in 2023 and 2024. The bank’s economists believe that the likelihood of the United States entering a recession outweighs the possibility of avoiding one.

The most likely outcome, according to JPMorgan, is “boil the frog” recession, with the U.S. slipping into recession at the same time as the rest of the global economy. The economists assigned a 36% probability to this scenario, highlighting that it is primarily driven by the implementation of aggressive monetary tightening in response to persistent inflation.

“Central bank aspirations for a soft landing have tempered the pace of tightening. However, hopes for a painless slide in inflation back to target are likely to be dashed, requiring policy to turn sufficiently restrictive to break the back of the expansion,” they described, adding:

Broad-based developed-market tightening points to a more synchronized global downturn sometime in 2024.

The second-most likely outcome, with a 32% probability, is “slip-sliding away” recession that the economists expect to occur between late 2023 and early 2024. In this outcome, the U.S. economy would experience a mild downturn resulting from an ongoing credit crunch, leading to a recession, while other economies across the globe would display resilience, they detailed.

Moreover, the JPMorgan economists have assigned a 23% probability for a Goldilocks soft landing, in which the U.S. economy successfully avoids a recession. Lastly, they have identified a 10% probability of a near-term recession occurring in mid-2023.

There is a widespread expectation that the U.S. economy will enter a recession. Economist Steve Hanke has warned of an impending “ugly” recession, while gold bug Peter Schiff anticipates a “massive” recession and a severe financial crisis. Bank of America is preparing for a mild recession, and Bloomberg Intelligence’s senior commodity strategist, Mike McGlone, believes the U.S. economy is on a path toward a “severe deflationary recession.” In contrast, Blackrock CEO Larry Fink does not foresee a significant U.S. recession this year.

Which of the four scenarios outlined by JPMorgan’s economists do you think is the most likely? Let us know in the comments section below.

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