It’s a precarious world out there in the economy. While the last couple of months has brought some positive news on the inflation front, the market now fears a recession is squarely in the crosshairs.
The S&P 500 has peeled back this week after some underwhelming economic data out of the US, giving up some of those well-earned gains off the back of softer inflation readings. So what is it, inflation or recession? Stocks go up or stocks go down?
I chatted with Sam Burns this week on the Invezz podcast, a market strategist at Mill Street Research, to get his take on just about everything – the stock market, the Fed’s actions, a tight labour market, tech layoffs, bonds, the housing market and whether now is a good time to buy.
The S&P 500 had just dipped below 4,000 as we recorded, as weak US retail numbers and industrial production drove stocks lower. I asked Sam just how likely a recession was, and whether the Fed should consider whether it has overextended itself in the bid to stave off inflation.
We also discussed the opposite scenario, that is, the likelihood that inflation may not be beaten after all. Comparisons with the 70s felt apt, a decade when inflation roared and perhaps the closest precedent we have to this, well, unprecedented climate.
The below chart shows that inflation was tamed a few times in the 70s, before surging back with a vengeance – something we discussed on the podcast in relation to today’s climate.
I wrote about housing this week. I wanted to get Sam’s take on the softening market, and some of the more pessimistic predictions floating around about where the market may be heading.
We also covered the labour market, which has been extremely tight despite the hiked interest rates and headline-grabbing layoffs coming out of the tech sector. This week brought yet another big tech firm, Microsoft, cutting a substantial portion of its workforce. Sam opined about why he is more positive on stocks, yet not quite ready to shift off his underweighting of the tech sector.
This is just a sample of what was really a bounce around just about every major macro topic right now. In a world throwing up seemingly endless conversation points right now, there was certainly no shortage of material.
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