The banking crisis may cause a recession


The banking crisis may cause a recession

When considering the US economy, a key factor is a confidence. But the volatile banking environment threatens to undermine most people’s confidence and strain their financial picture.

Recent events have shown that the line between Wall Street and Main Street is becoming increasingly unstable: when stocks fluctuate, people cut back on their spending levels.

Falling costs reduce retail sales, and this, in turn, causes a market reaction that is passed on to consumers.

At the same time, incomes are retreating – after adjusting for inflation – interest rates are climbing to record highs. The Federal Reserve head says financial sector imbalances will cause banks to tighten lending standards, making lending even more difficult.

This leaves consumers with less access to cash to cover the rising cost of living, housing, and other expenses. As households feel increasingly fearful, this affects their confidence in the overall economic situation.

American financial outlook

Americans say they need an average net worth of $774,000 to feel financially secure but more than $2 million to feel wealthy.

The University of Michigan’s consumer sentiment index fell low for the first time in months. The Conference Board’s consumer confidence index also retreated.

Fewer people plan to buy a house or car or spend money on major appliances or vacations. The Conference Board found that spending cuts and rising interest rates could shortly push the economy into recession.

Wall Street has debated for months whether the country is headed for recession. However, many economists have predicted it will happen sometime in the second half of this year.

And yet, thanks in part to a solid labor market, the economy has remained remarkably resilient to avoid a complete collapse.

BONUS VIDEO: Weekly news summary from the markets

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