![]() The higher rates have weighed on stock prices, as companies face rising debt costs and a slowing economy.īut by the third quarter, Bannister predicts that year-over-year inflation will tumble to just 3.5% as the Fed’s rate hikes continue to impact the economy. The Fed raised interest rates seven times in 2022, hoping to slow consumer price increases that reached a four-decade high of 9.1% during the summer. He also claimed that inflation will fall quickly over the next few months, leading the Federal Reserve to pause its interest rate hikes in the second quarter. economy will avoid a recession in the first half of 2023 and achieve something that “may resemble a ‘soft landing,’” despite the potential for a “major slowdown” in corporate earnings. ![]() Shanghai has been under a lockdown for five weeks now and the government has closed ports and factories in some of the country's largest cities.“There is a window for a first-half 2023 rally,” Bannister wrote in a Monday research note, arguing the S&P 500 index could jump roughly 10% to 4300 by mid-June. If the prospect of recession wasn't enough, Wall Street is also dealing with a challenging geopolitical environment.Ĭhina is implementing stringent rules to fight a spike in COVID-19 cases. Then there's China and the war in Ukraine To be sure, a recession is still not seen as a likely outcome, but it's widely seen as a potential threat to the economy. It's trying to slow down the economy just enough to cool down inflation.īut raising interest rates is never an exact science, and investors fear the Fed will be too aggressive and unintentionally tip the economy into a recession. The goal is to engineer a so-called soft landing. "But I do think the market is unsettled by the idea of these big, chunky, kind of quick increases." "I think that the market has wanted the Fed to fight this fight," says Lori Calvasina, the head of U.S. The Fed is now widely expected to raise interest rates by half a percentage point at its follow-up meeting next week, and markets are bracing for more rate hikes this year. and global economies.īut investors aren't just worried about inflation itself, which is at a 40-year high, they are also unsure about whether the Federal Reserve will be successful fighting it. Those surging prices have proven to be a persistent, pernicious problem for the U.S. deals with its highest inflation levels in about 40 years. The market has already been under pressure as the U.S. The Fed is fighting inflation - and it could get rough Meanwhile, Apple posted very strong results, but its share price fell after it warned that COVID-19 lockdowns in China could impact supply chains, and hence sales. Other Big Tech companies have also reported disappointing earnings or outlooks, with a few exceptions, such as Meta, the parent company of Facebook.Īmazon on Thursday posted its first quarterly loss since 2015, partly because people returned to shopping in physical stores, marking a sharp contrast to the pandemic when profits at the online retailer boomed. The announcement sent shares down by more than 40%. Netflix shocked Wall Street last week after announcing it lost subscribers in the first three months of the year, the first time that's happened in more than a decade. Amazon this week posted its first quarterly loss since 2015. An Amazon truck is seen entering a warehouse in New York City on April 25.
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