Stock market traders don’t seem to care what’s behind the recent inflation. Enlivened by dreams of artificial intelligence abundance, they have raised the prices of big tech companies like Nvidia, Apple, Meta (Facebook), Alphabet (Google), Tesla and Microsoft since the fall. As I wrote recently, cruise lines like Carnival, Royal Caribbean, and Norwegian Cruise Line have been thriving on pent-up demand from consumers eager to see the world in seaborne comfort.
Right now, for the markets, the sky seems to be the limit.
Causes of anxiety
However, I am concerned.
The reasons for low inflation are not just an academic interest. If, for example, the Fed has an interest rate increase no It has had such a significant macroeconomic impact so far, it may simply be because it notoriously operates with “long, variable lags”, and it may still be painful – even if inflation is falling for other reasons.
However, some painful effects are already discernible. High credit card rates add to consumer distress. Bond losses from rising interest rates have contributed to the weakness of regional banks. Exorbitant mortgages hurt housing and commercial real estate, while out-of-home exodus led to dwindling office occupancy. How long that will last is anyone’s guess.
The rate of interest increases so quickly and this large volume usually “leads to a recession” Ian Shepherdson, Pantheon Macroeconomics chief economist warned in a presentation to clients this month. credit tightening For small businesses caused by troubled regional banks didn’t help either. Mr. Shepherdson is not saying there will definitely be a formal recession, but he did say that slower growth is coming.
It is still the opinion of the majority on Wall Street that there will be a recession in the next 12 months, a Wall Street Journal The poll showed this month. But because of the onslaught of data indicating that the economy is still in growth mode, many economists are downplaying the odds of a recession, predicting that if it does, it will be mild.