Goldman Sachs strategists have said that the already depleted stock market, which got much worse after a massive sell off this week, is about to see further loss before the Federal Reserve begins tightening money.
Vickie Chang, a Goldman Sachs analyst has said the sell off will probably not stop until the Fed stops raising interest rates and it looks as though this may not happen until a recession hits.
“It may be necessary for the market to become more confident than it is that financial conditions tightening has been sufficient, and that the Fed has delivered and signaled enough tightening,” Chang said in a note.
“Monetary policy has historically stopped tightening about three months before equities bottom and shifted to easing about two months afterwards.”
This year alone, the S&P has fallen by more than 18 percent, the Nasdaq Composite is plunging almost to rock bottom and the Dow Jones Industrial Average has been falling for nine consecutive weeks.
“A shift to Fed easing is unlikely without a clear move into recession, but — as in late 2018 — a clear signal that tightening risks are receding may be sufficient,” Chang said.
Fox Business reported:
There are growing fears on Wall Street that the Fed may inadvertently trigger a recession with its war on inflation, which climbed by 8.3% in April, near a 40-year high. Other firms forecasting a downturn in the next two years include Bank of America, Fannie Mae and Deutsche Bank. Subramanian put the odds of a recession around 40%.
Economic growth in the U.S. is already slowing. The Bureau of Labor Statistics reported earlier this month that gross domestic product unexpectedly shrank in the first quarter of the year, marking the worst performance since the spring of 2020, when the economy was still deep in the throes of the COVID-induced recession.
Fed policymakers already raised the benchmark interest rate by 50 basis points earlier this month for the first time in two decades and have signaled that more, similarly sized rate hikes are on the table at coming meetings as they rush to catch up with inflation. Chairman Jerome Powell recently pledged that officials will “keep pushing” until inflation falls closer to the Fed’s 2% target.
Still, he has acknowledged there could be some “pain associated” with reducing inflation and curbing demand but pushed back against the notion of an impending recession, identifying the labor market and strong consumer spending as bright spots in the economy. Still, he has warned that a soft landing is not assured.
Referring to the Ukraine war and continuing lockdowns in China, Powell said last week during a Wall Street Journal live event, “It’s going to be a challenging task, and it’s been made more challenging in the last couple of months because of global events,” adding, “there are a number of plausible paths to having a soft or soft-ish landing. Our job isn’t to handicap the odds, it’s to try to achieve that.”
Biden and the democrats back on a gun control issues, since the tragic school shooting in Texas, yet, people who do break the laws, purchase guns buy lying on State and Federal applications, go Scott free, without any repercussions, even thou a ton of laws were broken.such as the presidents son Hunter Biden, or maybe even more democrats who have the laws sweep under the carpet, and this includes the Secret Service, the DOJ, and even the president with his “pay to play financial gains”.Time for change is right, it starts with the mid terms,and ends with impeachments, jail time, mandatory restitution for money gained from adversaries under illegal means,