CIO for Wealth and Investment Management Darrell Cronk reacts to the former Federal Reserve Chair Alan Greenspan saying that a U.S. recession is likely.
Strategic Wealth Partners investment strategist Luke Lloyd addresses the biggest risks for the 2023 economy, which could include a mild recession and a credit crisis. "I tend to agree more with Alan Greenspan that it's {recession] probably the likely outcome," Cronk said Wednesday.
"And keep in mind, it's not just interest rate hikes or cuts for that matter. It's the combination of the money, supply is tightening, the stronger U.S. dollar has put pressure on financial conditions. Bank reserves are running off. So there's a whole myriad of other elements that are also conspiring to tighten financial conditions simultaneously," Cronk explained on Alan Greenspan is a former Federal Reserve chairman who led the U.S. central bank for nearly two decades. On the other hand, he refuted Dudley's argument that the Federal Reserve's rate hikes are what's causing a recession, clarifying that he doesn't believe the incremental raises are solely responsible. While Cronk noted the Fed's involvement is "a great point," he said he would have to take "a little bit" of the other side of the argument into consideration. "I'm not sure that just simply cutting rates would do it [avoid a recession]. There's the lag effect that we all know about with monetary policy. So typically 6 to 9 months, which means, if you use that as the lag effect, we're just now feeling the June 75-basis point and maybe the July 75-basis point hikes," Cronk explained."We've yet to feel the 75 in September, the 75 in November and the 50 in December, and whatever else we do here in 2023. So that's going to bite in the first half of 2023," he added.
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