It seems like almost every analyst is saying we will face some degree of a recession in the coming year or two. Some believe it will be light, some believe it will be moderate, and some believe it will be severe.
China recently reopened, which is good news.
The Russia-Ukraine crisis is ongoing, which is terrible for humanity, not to mention the market.
BOJ and other central banks across the world are raising rates to fight inflation.
Fed chair, Jerome Powell, says that there is still some pain to come as they will continue raising rates. They’ve slowed rate increases and may pause soon but they will keep them high “as long as it takes” in order to tame inflation. This exact timetable is unknown and relies on future conditions but still sounds pretty harsh.
Over the past several months, inflation has been noticeably ticking down but is still pretty high YoY. It’s clear the rate hikes have been helping to some degree, but we know there’s a lagging effect. We haven’t seen this affect the unemployment rate just yet and consumer spending is still holding on. But we may get hit hard soon. If that happens, inflation will come down even more, but it will also take down corporate earnings, which will increase unemployment, which will have a very negative affect on the economy.
The golden question is: exactly how much will earnings come down, and how hard will the recession be…
No one knows just yet. So far, it hasn’t been horrible.
How much of this information is already baked into the current market (in your opinion) being that the overall market sentiment is pretty negative over the next 6 months? And why do you feel that way?
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