Economist David Rosenberg’s newly highlighted economic model suggests that the US economy is likely to face a recession in 2024. Known as the “full model,” it indicates an 85% chance of a recession within the next 12 months, marking its highest reading since the Great Financial Crisis of 2008. The model, based on various indicators including financial conditions indexes, debt-service ratio, foreign term spreads, and the yield curve level, has a track record of providing timely recession warnings since 1999 without generating false signals.

Reassessing the Prevailing Economic Narrative

Rosenberg’s economic model challenges the current narrative of a smooth economic trajectory by suggesting the likelihood of a recession in 2024, despite previous expectations of a “soft landing.” While accurately predicting the subdued economic conditions of 2023, the model now warns of heightened recession risks. This divergence from conventional wisdom necessitates a reconsideration of investment and business strategies to adapt to the changing economic landscape. Additionally, policymakers may need to recalibrate their approaches, potentially implementing measures such as monetary stimulus or fiscal policies to mitigate the potential impact of an economic downturn. The model’s insights also shed light on the limitations of traditional indicators like the yield curve, highlighting the need for a more nuanced understanding of economic dynamics in today’s complex financial environment.