The biggest risk to US growth: The wealth effect linked to share prices

US growth is going to slow under the effect of both supply-side mechanisms (the return to full employment) and demand-side mechanisms (declining housing and corporate investment). This leads us to examine the risk of this slowdown turning into a recession. There are many stabilising factors: the good financial situation of companies, the expansionary fiscal policy, the deleveraging by US households, the fact that the Federal Reserve is not going to hike its interest rates aggressively. The most serious risk factor seems to be the wealth effect linked to the fall in share prices, which is powerful in the United States.