The stock market will end 2023 in the red, according to forecaster François Trahan. There is no chance of avoiding a recession, according to him. He even believes that the index S
“At its trough, the S index
François Trahan is visiting Montreal this week. He came from Virginia, where he now lives, to meet clients and to participate this Thursday at noon in an event organized by the CFA Montreal organization downtown.
“We have everything to have a severe recession,” he says. I don’t know if there will be a financial crisis, but the risk is very high at a time when investors no longer believe in this. The story has only just begun. The worst is ahead of us. »
The 54-year-old strategist says the trough of a recession comes two years after interest rates peak.
“If rates have peaked, the economy will be at its worst in the third quarter of 2025. For leading indices, like the stock market, that’s 18 months after the peak in interest rates, so six months before the trough of a recession. If we assume that rates are currently at their highest level, the stock market bottom will therefore be reached in March 2025.”
François Trahan expects leading indices to deteriorate over the next three months and for the stock market to end 2023 with a decline for the year despite the gains recorded so far since January 1.
Financial data firm FactSet reported last Friday that Wall Street analysts expect the S
“Opinions around me have changed a lot since last fall,” says François Trahan.
“If before a majority of my clients believed in a recession, a majority of them now believe in a slowdown and believe that we are on the verge of emerging from it. They believe the story pushed by the Fed of a soft landing for the US economy. »
The thesis of a soft landing actually still seems to hold water south of the border. The resilience observed reflects an American consumer who continues to spend even if his morale is affected. If confidence indices remain low, consumption statistics continue to defy sentiment because the job market is holding up.
“What is coming will surprise a lot of people and Wall Street economists will be exposed over the next year, almost all of whom now advocate a soft landing,” says François Trahan, taking care to weigh his words.
“About 55% of economists cannot identify a recession that is six months away from starting. Many cannot do it even when the recession has started,” adds the man who is now self-employed after launching the firm Trahan Macro Research.
“Consumer economies are sensitive to changes in interest rates. With 68% of its GDP coming from consumption, the U.S. economy is most responsive to a change in interest rates,” he says.
“Rates started rising in early 2022, so recession was always a question of 2024. By the third quarter of 2025, the economy will still be in trouble. When rates start to fall sustainably, we can start talking about a possible recovery. The economic impact of what the Fed has just done is before us. This is really the story of 2024 and 2025.”
According to him, we should not be too upset about the stock market surges in the indices in the current market. “We are going to have other bear market rallies where people will think that the recovery has arrived. In a typical bear market, there are three. »
François Trahan caused a stir last November when he said on the set of a public affairs program on TVA that he anticipated an “apocalyptic” situation for the years 2023 and 2024.
An “economic apocalypse” results, in his view, in rising unemployment and “probably” a financial crisis. “Maybe more than one,” he says.
