RE: Boeing23 Dec 2022 11:15
I saw this yesterday as USA plunged 3% , dated *28 November nearly one month ago.
It was a good idea to place trades by hindsight close.
A U.S. recession induced by central-bank efforts to curb inflation is likely to arrive by mid-2023 and trigger a sharp and “temporarily painful” decline in equities, according to... *Deutsche Bank researchers.
“We see major stock markets plunging 25% from levels somewhat above today’s when the U.S. recession hits, but then recovering fully by year-end 2023, assuming the recession lasts only several quarters,” said David Folkerts-Landau, group chief economist and global head of research, and Peter Hooper, global head of economic research.
In a note released on Monday, the researchers cited persistently high wage and price inflation in the U.S. and Europe driven by robust demand, tight labor markets, and supply shocks for their thinking. Based on the historical record of several major industrial countries since the 1960s, any time trending inflation has declined by 2 percentage points or more, such a decline has been accompanied or induced by a rise in unemployment of at least 2 percentage points. Currently, they estimated, inflation trends in the U.S. and Europe are running around 4 points above desired levels.
Deutsche Bank DB, -0.62% isn’t alone in its thinking. In July, legendary investor Jeremy Grantham warned that stocks could plunge 25% as the “superbubble” continues to pop. In August, Citi research analyst Christopher Danley wrote that chip stocks could drop by that magnitude as investors enter “the worst semiconductor downturn in a decade.” And earlier this month, a team of analysts at Morgan Stanley MS, -0.58% analysts led by Mike Wilson implied that the S&P 500
SPX, -1.45% could see further downside of up to 25% if a recession hits.
A downturn may already be under way in Germany, where Deutsche Bank is based, and in the eurozone as a result of the energy shock triggered by Russia’s invasion of Ukraine, the Deutsche Bank researchers said. Meanwhile, the Fed and European Central Bank are “absolutely committed” to bringing inflation down in the next several years, and “it will not be possible to do so without at least moderate economic downturns in the U.S. and Europe, and significant increases in unemployment.”
“The good news is that we also think the Fed and ECB will succeed in their
missions as they stick to their guns in the face of what is likely to be withering public opposition as unemployment mounts,” Folkerts-Landau and Hooper wrote. “Doing so now will also set the stage for a more sustainable economic and financial recovery into 2024.”