The collapse of US consumers: Unemployment expectations in the US are now ABOVE 2020 levels and at their highest since 2008. In 2024, a poll showed that a whopping 56% of Americans thought the US was in a recession. Is the US set to enter a recession? (a thread)

Below is a Harris poll conducted in May 2024, in the lead up to the election. 56% of Americans thought we were in a recession and 49% thought the S&P 500 was down YTD at the time. In reality, GDP growth was "strong" and the S&P 500 was up 12% YTD at the time of the poll.

Fast forward to now, and consumers are even more pessimistic. The median expected change in household income over the next 12 months has collapsed. In fact, expectations are now at their lowest level since the global economic lockdowns in March 2020.

Inflation is making it even worse: US consumers believe inflation will rise to 6.0% over the next 12 months, the highest since May 2023. Americans see annual inflation at 3.9% over the next 5-10 years, a 30-year high. We now effectively have years of compounding inflation.

Long-term inflation expectations in the US are officially at their highest level since 1993. As President Trump rolls out widespread tariffs and economic uncertainty rises, so are inflation expectations. The result is a massive collapse in consumer sentiment.

A RECORD ~60% of US consumers expect business conditions to worsen over the next 12 months. Even at the worst part of the 2008 housing crash, this metric peaked at ~42%. It is safe to say that consumers are the most pessimistic they have ever been in recent US history.

And, the market is pricing-in a recession: The S&P 500 has decreased -2% since Fed rate cuts begin in September 2024. In the case of rate cuts during a recession, the S&P 500 declined -6% in 6 months -10% within 12 months. The AVERAGE post-pivot return is +1% in 6 months.

Furthermore, it's not just Main Street. In the March CNBC Fed Survey, which includes fund managers, strategists and analysts, recessions odds jumped. The probability of recession rose 36% from 23% in January. Institutional sentiment has shifted sharply bearish.

In last week's The Economist/YouGov Poll, Americans were asked about their perception of the economy. 37% currently believe that we are in a recession and 31% are not sure. Just 32% believe that we are currently NOT in a recession. This is why rate cut odds have spiked.

This time, white-collar jobs are also feeling the pain. The US professional and business services sector has lost 248,000 jobs since May 2023. Jobs in the sector have contracted for 17 straight months, marking the longest streak since 2008. The labor market is softening.

Lastly, one of the most telling signs of the economy has been gold. Between the US debt crisis, inflation, trade uncertainty, and recession fears, gold prices are soaring. We expect major change ahead. Follow us @The Kobeissi Letter for real time analysis as this develops.