A Balance Sheet For The U.S. Economy

It is said that life is a marathon and not a sprint. If so, Eliud Kipchoge has led a life well-lived. Last Sunday, the peerless Kipchoge set a world record in the marathon, cementing his reputation as the best of all time at that distance.

Economic and market performance is best measured over long intervals, as well. That hasn’t been the easiest perspective to maintain, as the pandemic (and the associated policy response) has produced a series of extremes in both directions. We’re presently dealing with a deceleration caused by rising interest rates, wondering if activity will slow to a halt or reverse course.

The outcome will vary by location. Our updated global economic forecast reflects our expectation that the United Kingdom and Europe will experience a recession in the coming quarters. But we have not yet concluded that the U.S. economy will enter a downturn. Questions about our call continue to come in, so we thought it would be useful to offer a current balance sheet for the American economy.

Still no recession call for the U.S.


  • The housing industry is in recession. We’ve experienced a 20% drop in home sales over the past year, and home prices fell last month. Both trends are likely to continue, with mortgage rates more than double what they were last January. A slowing housing market will limit the purchase of furnishings and a range of services used by homeowners.
  • The Federal Reserve is going to raise interest rates to much higher levels than previously thought. Financial conditions are still not overly tight, and real interest rates are still negative. Fed balance sheet reductions will add to the restraint that monetary policy will place on activity.
  • International markets are slowing. This will increase the American trade deficit, which is a drag on gross domestic product (GDP).