Wall Street experts are warning that the Federal Reserve should not raise interest rates too quickly as it scrambles to confront decades-high inflation and could cause a downturn in the economy.
The Federal Reserve Chairman spoke at his re-nominations hearing.
Many Wall Street experts are sounding the alarm about the potential impact to markets and the economy because investors have become increasingly nervous about the Federal Reserve's aggressive interest-rate-hiking cycle.
In a note on Friday, Bank of America's chief investment strategist, Michael Hartnett, warned that the risk of a recession in the next six months is rising.
Several prominent economists from across the political spectrum have warned of a recession within the next couple of years, with many putting the odds of a downturn at over 50%.
Lawrence Lindsey, who served in the George W. Bush administration, said that the odds of a recession by the end of 2023 were over 50% because the central bank had to play catch up to fight inflation.
The Fed has allowed itself to get far further behind the curve, which is why Lawrence Summers thinks there will be a near-term recession within the next 30 months.
The Minneapolis Fed President warned earlier this week that the central bank shouldn't raise rates too fast or too far, as it would raise the risk of inflation.
One of Wall Street's most popular recession indicators has gained attention in recent weeks as the Federal Reserve gears up to aggressively raise rates: If the yield curve inverts in 2022, that may well signal that a recession is coming. The yield curve is flattening as government bond yields surge. The Federal Reserve Bank of San Francisco found that the yield curve preceded every recession except one since 1955. Matthew Nest, global head of active fixed income, said he was intently focused on the yield curve.
While most experts attribute rising recession risks to the Fed's upcoming interest rate hikes and tightening monetary policy, some are also warning about the potential impact of a Russian invasion of Ukraine. The stock market has been weighed down by political uncertainty in recent weeks as tensions between Russia and the West increase. Morgan Stanley chief U.S. equity strategist Michael Wilson said in a recent note that if Russia invaded, it would pose a significant risk for markets and the economy. The spike in energy prices under that scenario would destroy demand and possibly tip several economies into a recession.
Despite recent volatility, it is important to remember that we are still in an environment of robust economic and earnings growth, and in our base case we expect upside for equity markets over the balance of the year.
The stock market fell 600 points as Russia-Ukraine tensions reached a critical moment.
The stock market is jittery after the latest inflation surge.
The Federal Reserve Hikes Interest Rate to Fight Inflation.
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