U.S. Economy Braces for Recession as Fed Chief Warns of Stagflation

The U.S. economy faces headwinds, with Minneapolis Fed chief Neel Kashkari warning of a stagflation-driven recession, partly due to hostile trade policies. Meanwhile, Treasury Secretary Scott Bessent plans to combat market manipulation by setting price floors across industries. Markets reacted to earnings reports and recession predictions.

Daniel Jones of Crude Value Insights echoed Kashkari's concerns, attributing the potential recession to U.S.-China trade policies. Despite these warnings, U.S. stocks ended Wednesday mixed, with the S&P 500 and Nasdaq gaining ground due to positive earnings reports. Morgan Stanley's stock closed +4.2% after strong Q3 earnings, while Bank of America ended +4.3% after beating estimates. However, Abbott Laboratories and Progressive missed estimates, and PNC Financial disappointed in Q4 guidance.

The Federal Reserve's Beige Book showed little change in U.S. economic activity. Odds of three rate cuts in 2025 climbed to 77% on prediction market Kalshi, up from 48% a month ago, reflecting growing recession fears. The gold spot price reached the $4,200 level on Wednesday, indicating investor uncertainty.

As the U.S. government shutdown is expected to last over 36 days, according to Kalshi, the economic outlook remains uncertain. While earnings reports provided some positive news, concerns about a stagflation-driven recession persist. Investors will closely watch for further developments and indicators of economic health.