Stocks failed to sustain a rebound after a rough trading session on Wednesday. Investors digested the latest remarks on inflation from Federal Reserve Chair Jerome Powell.
Powell on Wednesday told congressional leaders that the Federal Reserve has the resources and the “resolve” to tamp down surging inflation. Last week, the central bank raised interest rates by 0.75 percentage point, the largest increase since 1994.
“Inflation remains the biggest risk to financial assets, and Jerome Powell has made his position abundantly clear: The Fed will continue to raise interest rates until inflation begins to wane. Until then, a sustainable rally for risk assets is hard to imagine,” wrote Robert Schein, chief investment officer of Blanke Schein Wealth Management. “Tight monetary conditions will continue to be a headwind to financial markets until the Fed gives the greenlight,” Schein continued. |
Indeed, this week some banks raised their expectations of a recession.
Citigroup raised its odds for a global recession to 50%, saying that consumers are starting to pull back on spending.
"The experience of history indicates that disinflation often carries meaningful costs for growth, and we see the aggregate probability of recession as now approaching 50%," read a note from Citigroup.
Goldman Sachs also believes the risks of a recession are “higher and more front-loaded." |
