Skip to main content

The U.S. economy and S&P 500 face a difficult landing if the Federal Reserve does not do this.

The largest reason for optimism that a recession caused by the Federal Reserve can be avoided next year has just been edited away. The upward adjustments to hourly pay in September and October, followed by an even greater increase in November, pushed wage growth well beyond the range consistent with the Fed's inflation objective of 2%.

The U.S. economy and S&P 500 face a difficult landing if the Federal Reserve does not do this.

In actuality, there is a growing consensus that the only way for the U.S. economy to avoid a harsh landing and a worse decline for the S&P 500 is for the Fed to lift its inflation objective. Prior to halting its rate hikes, the Federal Reserve may be willing to do so, but would require additional cooling.

Joe Brusuelas, chief economist at RSM, told IBD that the 2% inflation target "is a lot more elastic than the Fed is letting on, because I don't think there's any constituency out there for the bloodletting that would be necessary" to achieve it.

According to Brusuelas, the Fed would need to increase unemployment to 6.7% in order to restore inflation to 2%. However, achieving an inflation rate of 3% may be accomplished with a considerably smaller increase in unemployment to 4.6%, resulting in the loss of 1.7 million jobs.

.net/YwotbKdP4sVunJGfdhmgww/e8f260a6-84bf-4222-a093-e1ef14e44c00/

Joe Quinlan, head of market strategy at Merrill & Bank of America Private Bank, stated, "If the Fed is hell-bent on achieving 2% inflation, then this could necessitate additional rate hikes and a higher terminal rate than what is now anticipated." It is possible that excessive monetary tightening has precipitated a severe economic and earnings recession in the United States.

However, Quinlan also anticipates a more optimistic outcome. If inflation continues to decline toward 3 percent and Fed members "take their time" instead of pressing the issue, he anticipates a market rally.

"I wouldn't be surprised if the new Fed inflation target in approximately two years is somewhere between 3% and 3.5%. This is within the realm of possible and acceptable to all parties."

Comments

Popular posts from this blog

After the demise of FTX, Goldman Sachs apparently intends to acquire cryptocurrency companies.

Mathew McDermott, a Goldman Sachs executive, stated that his firm is already conducting due diligence on a number of cryptocurrency companies. As the current FTX crisis impacts crypto company valuations, the financial services firm Goldman Sachs intends to invest millions to purchase or invest in crypto companies while their prices are low. Mathew McDermott, an executive at Goldman Sachs, reportedly stated in an interview with the mainstream media outlet Reuters that large banks see opportunities in the market as a result of the FTX crash highlighting the need for additional regulation within the business. The CEO noted that the company is now observing chances that are "more reasonably priced" and is conducting due diligence on a number of crypto startups. McDermott stated in his analysis of the FTX catastrophe that the market's attitude experienced setbacks. Nonetheless, the traditional finance executive emphasized that although FTX has become the "poster child...

Unlocking the Secrets of the World of Finance

  In today's fast-paced global economy, understanding the intricacies of finance is paramount for both individuals and businesses alike. Finance serves as the lifeblood of any economic system, fueling growth and prosperity. Our team at AIPRM Corp is dedicated to providing you with comprehensive insights into the world of finance. In this article, we delve deep into the financial landscape, unraveling its various components and complexities. Navigating the Financial Landscape Finance: A Holistic Perspective Finance encompasses a wide array of financial instruments and institutions, each playing a unique role in the broader financial system. At its core, finance involves the management of money, investments, and assets. Our comprehensive exploration of finance will leave you well-informed, whether you're a seasoned investor or a newcomer to the world of finance. Financial Markets and Instruments The world of finance thrives within a complex web of financial markets and instrument...

60 billion pound financing package for English authorities

Michael Gove, the Secretary of State for Levelling Up, has today (19 December 2022) agreed a nearly £60 billion package for councils in England for the next fiscal year, ensuring that councils can continue to provide essential frontline services. The settlement means councils throughout England will receive an additional £5 billion, a 9% increase over last year's settlement, as the government continues to support councils and public services despite mounting financial pressures. The agreement for the following year contains a one-time Funding Guarantee that ensures every council in England will get at least a 3% increase in core spending power before any local decisions are made regarding council tax. Alongside this, the government confirmed today a new £100 million scheme for councils to safeguard the most vulnerable households from council tax hikes, fulfilling the campaign pledge to protect local taxpayers from excessive increases. Social care is also a priority, with the govern...