Tough week for forecasts on Wall Street. These are the references of the S&P 500 according to Cava

As every day we analyze the American economy from the hand of José Luis Cava, independent analyst.

Many Wall Street brokerages and research services, as well as White House economists, believe that the US economy will face a recession but that it will be relatively mild. Are these forecasts reliable?

In the first place, Cava points out a very relevant piece of information regarding this question. “Of the 469 national recessions that have occurred in the world from 1988 to 2019, how many has the IMF predicted? Four. Not 1%”. If we take into account the number of analysts who predicted the 2008 recession, Cava assures that there were also four. “The rest didn’t see it coming.”

“The models don’t work. Why? It has a very clear logic.” You have to estimate the monetary policy, the fiscal policy,… and they don’t even know what it’s going to be. They also have to estimate when the war in Ukraine will end, if oil production will increase or how the zero covid policy will affect the Chinese economy.

No matter how good the analyst houses are, we are not going to trust their forecasts because the models fail and only a few will be right, says Cava.

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