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Markets Brace for Hard Landing

Wall Street sees inflation-taming efforts as likely to result in a recession

In July, markets rallied on remarks by Mr. Powell that were interpreted as foreshadowing a pivot to rate cuts. That interpretation turned out to be wrong, and on Wednesday, investors didn’t repeat the mistake.

Major stock-market indexes ended the day sharply lower, and two-year Treasury bond yields moved further above 10-year yields. 

Such yield-curve inversions have preceded every recession since 1980. 

Mr. Powell didn’t sugarcoat things. Inflation has to come down, he said, and that requires a softer labor market. “I wish there was a painless way to do that. There isn’t,” he told reporters.

Greg Ip WSJ 22 September 2022


The Market Still Isn’t Priced For a Proper Recession

Markets are doing what they always do, hoping against hope that there’s no recession, or at least a very mild one, right up to the last minute

Not only might there be a recession, but the Fed has no intention of stepping in to save investors this time.

Wall Street continues to predict decent profit growth next year.

The key question, of course, is how much risk to earnings is priced in already. After all, stocks are down 20% this year and only 3% above their June low,

James Mackintosh WSJ 22 September 2022


Central banks cut in unison in response to Covid. They are now hiking in unison. 

What can go wrong?

Mish 22 September 2022

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