Jim Paulsen, chief investment strategist at Wells Capital Management, is warning clients that the chances of an economic shock are growing, CNBC reports.
“Policy officials, economists and investors have become conditioned by the post-war experience that recessions simply don't happen until economic policies turn restrictive. Not before interest rates rise, the yield curve inverts and not until the Federal Reserve drains the punch bowl and the money supply slows,” CNBC quoted Paulsen.
“However, the predictive relationships between traditional economic policies and future economic growth have weakened considerably in recent years raising the risk of an ‘unexpected recession,’" CNBC quoted Paulsen.
There's no guarantee that a rising stock market, cheap money and huge levels of national debt will pave the way for future growth, CNBC explained.
“This recovery has been unique in the post-war experience. No one seems to understand what is driving economic growth (and why, for example, massive economic policy stimulus has not quickened the pace of economic growth) or what may end this recovery,” CNBC quoted Paulsen.
“This recovery has been chronically surprising, inexplicable and disappointing. Would it be shocking if it ended abruptly and without conventional warning?”
Paulsen’s warning joins an ever-growing chorus of respected experts advising us that all may not be as well as some would lead you to believe.
Citigroup's Chief Economist Willem Buiter recently warned that the global economy is likely to fall into recession next year as emerging nations struggle with tightening monetary policy.
He warned that China, Brazil and Russia are edging towards an economic downturn.
"(The slowdown) is not confined to China by any means," he told Bloomberg.
"The policy arsenal in the advanced economies is unfortunately very depleted, debt is still higher in the non-financial sector than it was in 2007. So we are really sitting in the sea watching the tide go out and not really able to respond effectively to the way we should."
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