Says a balanced warning addressed to:Wall Street“And outside the bank Federal Reserve It continues on its collision course with the financial markets.
Stocks are expected to fall andbond once more though inflation It has likely peaked, according to the latest MLIV Pulse survey, with a rate hike triggering a major sell-off in 2022. Ahead of the Jackson Hole Economic Symposium, scheduled for the time being Later this week, 68% of respondents believe that the most destabilizing period of price pressures in decades is eroding corporate profit margins and pushing stock further down.
The majority of the more than 900 participants, including strategists and stock market speculators, believe that inflation has reached its peak. However, 84% of them say it might take two years or more for the Fed, led by Jerome Powell, to bring inflation down to the official long-term target of 2%. During this period, American consumers will reduce their spending and unemployment will rise to more than 4%.
All of this negative sentiment underscores investors’ deep skepticism regarding the unexpected recovery in stocks worth $7 trillion recently. Despite the decline in stocks last week, the “S&P 500” index is still at a level that reduces its loss in 2022 to 11%, compared to 23% when it reached its lowest level in mid-June. US futures opened lower in Asian trading.
Evaluation of interest rate hike paths lowers US stocks in Wednesday’s trading
“This is a declining market trap, and inflation is a big, scary beast,” Victoria Green, co-founder of G Squared Private Wealth, said in an interview. time before there is a significant drop in prices.”
Reversal of declining bonds
The results of the survey indicate the suffering of stock buyers when their prices fell, who reappeared in the market following the very horrific first half, driven by betting on the easing of the austerity monetary policy, amid the transformation of a large number of quantitative funds into investment centers that bet on the rise. In contrast, stocks around the world recouped some of their losses as the 10-year Treasury yield fell to regarding 3% from a peak of close to 3.5% earlier this year.
As for the participants in the MLIV poll, they believe that bond prices will return to decline over the next month with a chance that Fed Chairman Powell will renew the hawkish expectations in the market during the Jackson Hole meeting in Wyoming this week. US stock futures fell on Monday, with stocks in Europe outpacing the annual decline.
Futures on Federal Reserve balances currently reveal that dealers are betting that the central bank will stop raising interest rates following raising the benchmark rate to 3.7%, and start reducing it by May 2023. However, even doves are pressing to raise rates, as recommended by Neil Kashkari, Chairman The Federal Reserve Bank of Minneapolis, raising it to 4.4% by the end of next year.
El-Erian: The US economy will not survive stagflation despite the Fed’s tightening
