- Elon Musk forecast a US recession next year that could last until the second quarter of 2024.
- He advised investors to proceed cautiously, conserve cash, and avoid using borrowed money.
- Musk has slammed the Fed’s interest-rate hikes as excessive and dangerous to the economy.
Elon Musk has predicted a US economic downturn that will last up to 18 months, and recommended investors ride it out by conserving cash, avoiding debt, and taking fewer risks.
“It does seem like we’re headed into a recession here in 2023,” Musk said during an episode of the “All-In Podcast” released on December 24.
“My best guess is that we have stormy times for a year to a year and a half, and then dawn breaks roughly in Q2 2024,” he added.
The Tesla, Twitter, and SpaceX CEO noted the severity of the looming recession isn’t yet clear, but it could rival the slump in 2009 that followed the collapse of the housing bubble.
Musk recommended investors brace for hard times ahead by setting aside some cash, and making prudent bets without using borrowed money.
“Hope for the best, prepare for the worst,” the technology billionaire said. “Don’t get too adventurous. From a cash standpoint, keep powder dry.”
“I really advise people to not have margin debt in a volatile stock market,” he continued. “If there’s mass panic in the stock market, then you’ve got to really be careful about margin debt.”
Musk has been pounding the recession alarm in recent weeks, and warning the Federal Reserve’s flurry of interest-rate hikes this year have increased the risk of a serious downturn. In response to rapid inflation, the US central bank has raised rates from almost zero in March to over 4% today, and signaled they could peak above 5% next year.
While higher rates can help relieve upward pressure on prices by discouraging spending, borrowing, and hiring, they can also pull down asset prices, erode corporate profits, and cause the economy to shrink.
Still, Musk suggested on the podcast that after a largely uninterrupted 14-year expansion, the US economy is “overdue” for a recession.
Jeff Bezos, Amazon’s founder and executive chairman, has offered similar advice to Musk in recent weeks. The e-commerce pioneer also warned of an impending recession, and advised Americans to “batten down the hatches” by taking fewer risks and delaying big-ticket purchases to conserve cash.
Read more: The world’s top investment firms pay Rob Arnott for advice. He shares 2 trades he thinks will deliver 15% annualized returns over the next decade — and breaks down why there’s a ‘decent likelihood’ the market sees new lows.