🎯 We will have a deep recession? (13 Updates) 👇
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We will have a deep recession?
(13 Updates) 👇
✔ “Markets are realizing that policy rates are set to stay higher for longer.”
✔ “Long-term bond yields climbed on still hot U.S. inflation in April.”
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FASTEST RATE HIKE SINCE 1980s 👇
✔ “Stubbornly high inflation has prompted the Fed’s fastest rate hike campaign since the 1980s.”
✔ “Markets are no longer pricing in repeated Fed rate cuts, a sign they’re grasping inflation’s persistence, in our view. And the full effect of central banks’ rate hikes is kicking in.”
WHY INFLATION REMAIN SO HIGH? 👇
✔ “Inflation and wage growth remain sticky, even with this deteriorating growth picture. Why?
✔ “U.S. consumer spending’s shift back to services from goods caused core inflation to fall at first.”
✔ “Yet labor constraints persist, with unemployment still near historic lows. We think tight labor markets are keeping wage gains high, making overall inflation stubborn.”
✔ “Inflation is running even hotter in Europe, especially the UK. Central banks face a clear trade-off, in our view: crush activity to ease labor constraints and curb inflation – or live with some above-target inflation.”
AVOID AN EVENTUAL DEEP RECESSION 🚨
✔ “We see the Fed nearing a pause in rate hikes and living with some inflation to avoid the deep recession needed to get inflation near its target.”
✔ “But we don’t see the Fed coming to the rescue of a faltering economy with rate cuts later this year due to the sharp trade-off between inflation and growth.”
✔ “Markets are coming around to our long-held view after having until recently priced in repeated rate cuts in 2023.”
✔ “We think the ECB will hike more, regardless of the economic damage. The BOE is in a similar position.”
✔ “Markets have priced in as many as four more BOE hikes. We think that might be a bit overdone, as it would be equivalent to the Fed hiking to around 7-7.5% – enough to trigger a severe recession.”
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Disclosure
This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. This material has been prepared for informational purposes only. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.