November 28, 2022

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Markets underestimate the coming global impact

Markets underestimate the coming global impact

On Friday, stock indexes collapsed and made the worst day on the Oslo Stock Exchange in more than two years.

Extreme fluctuations in interest rates have caused stocks to crash around the world.

And more in store, we have to believe the managers who are closely following the central banks’ battle against the specter of inflation.

It is also possible that a number of other investors have spent the weekend researching the portfolio and assessing what it would look like in a world of higher prices and higher interest rates than previously expected.

It will take a long time

The question is not whether we are headed into a recession, but rather how deep the recession will be, and whether we will have some form of financial crisis and a major global equity shock, says Mike Riddell, portfolio manager at Allianz Global Investors, to Reuters.

The strong rate hikes from central banks, both now and in the future, mean that Riedel believes it will take a long time before growth picks up.

We think markets are grossly underestimating the global blow to economic growth, he says.

Traders on Wall Street work in the bear market.

Traders on Wall Street work in the bear market. (Photo: David L. Nemec/AP/NTB scanpix)

Tighter monetary policy has led more people to believe in a deeper recession than previously thought.

Previously, we thought the recession would be short-lived and superficial. We are now rejecting that theory and considering the unanticipated consequences we would have as a result of tighter monetary policy, Mike Kelly of PinBridge Investments tells Reuters.

Will the US central bank follow up?

Jake Jolly, investment strategist at BNY Mellon, believes that the stock market will continue to decline before hitting the bottom.

The market is getting closer and closer to the point where this slump is being priced, but it hasn’t been priced yet, he says.

We remain vigilant, says Ross Koestrich, who heads the BlackRock Global Allocate Fund.

– Questrich told Reuters – I think there is a lot of uncertainty in terms of how quickly inflation will go down, and there is a lot of uncertainty as to whether the US central bank will actually implement such tough tightening as it indicated this week.(Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links that lead directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.

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