The “most widely anticipated recession in history” could arrive in 2024, said Eric Lascelles, chief economist at RBC Global Asset Management, during the keynote session at the Canadian Investment Review’s 2023 Defined Benefit Investment Forum in December.

“This is still an environment in which higher rates are exerting quite a profound drag on economic growth, and it’s a time when we’re beginning, we think, to see some of the more adverse consequences . . . . The window for economic pain from higher rates isn’t closing, I would say it’s actually just opening, based on historical precedent.”

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There are already key markers hinting at a distressing period for the Canadian and U.S. economies, including a weakening of global trade, consumer concerns with credit card spending and multiple declining fiscal quarters. “That’s not a recession . . . . But it’s definitely not an economy moving forwards at the normal velocity.”

Canadian institutional investors are also paying attention to the upcoming U.S. presidential election. In a potential scenario where Donald Trump returns as president, there would be increased uncertainty that would add a level of real risk to the Canadian economy.

A combination of pressure from an ongoing period of rate hikes by central banks and all-around “bad news” led many economists to expect a full-blown recession in 2023. Currently, there’s about a 70 per cent chance for a recession in 2024 said Lascelles, adding he’s expecting a short period of pain this year, potentially lasting only a couple of quarters.

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The issue of increased interest rates continues to play into this expectation. He projected it would take  roughly 27 months from the start of recent ongoing rate hikes before the economy is severely impacted, a calculation that points to mid-2024 for a possible recession.

“Historically, a rate increase of that size and that speed is by itself more than enough to do some economic damage. That amount of tightening looks pretty familiar in the context of past recessions. . . . We’ve never had this much tightening without a recession.”

Read more coverage of the 2023 Defined Benefit Investment Forum.