Bank of America Sounds Alarm on an Economic Triple Whammy

• Don't rule out a hard landing for the US economy just yet, according to Bank of America.
• Strategists led by Michael Hartnett warned that oil, the dollar, and the Federal Reserve all still pose a threat.

The US economy isn't in the clear just yet because of the triple threat posed by rising oil prices, the dollar, and the Federal Reserve, according to Bank of America.

Strategists led by Michael Hartnett said Friday that there remains a risk of a "hard landing" – which refers to a sharp downturn in economic activity that follows a period of growth.

Higher oil prices, the dollar's recent rally, and the potential for more interest-rate hikes pose a threat to stock prices in September and October and raise the "hard landing probability in the next six months," Hartnett's team wrote in a research note seen by Insider.

The strategists' gloomy outlook clashes with much of Wall Street, with top banks and even the Fed itself shelving their recession predictions in recent weeks.

On Tuesday, Goldman Sachs' chief economist Jan Hatzius said the odds that the US suffers a severe slump in growth are now just 1-in-7, citing cooling inflation and job-market resilience.

Hartnett's team said the consensus view is that there's a 20% chance of a hard landing – but warned the trifecta of oil, the dollar, and the Fed each still pose an economic threat.

The Brent and West Texas Intermediate crude benchmarks hit 10-month highs this week as both Russia and Saudi Arabia pressed ahead with long-signaled production cuts – and analysts are worried that could drive inflation back up.

Meanwhile, a gauge of dollar strength hit a six-month high of its own Thursday – and while a strengthening greenback is often seen as a sign of economic strength, it also means that American firms doing the bulk of their business abroad end up taking in lower profits.

Lastly, the Bank of America strategists sounded a note of caution about "higher-for-longer" interest rates amid signs that the Fed might not be done tightening just yet.

Boston Fed president Susan Collins said Wednesday that the central bank will still need to see more evidence that inflation is falling before it calls time on its war on soaring prices – and over 40% of traders are predicting it'll hike interest rates once more in 2023, according to the CME Group's Fedwatch tool.

When borrowing costs rise, spending and investment tend to fall, which drags on an economy's overall GDP growth.

Originally published by George Glover at Business Insider