Mohamed El-Erian, chief economist at Allianz, said the U.S. may escape a recession, but not stagnant inflation, and financial markets have yet to factor in the risk of a sharp slowdown in economic growth. , and therefore will fall.
He said in an interview on Wednesday (18th) that the United States cannot escape stagnant inflation, has seen economic growth decline, and will see inflation remain high in the future.
He said the Federal Reserve has started tightening monetary policy to catch up with reality, but there is still some way to go.
For the central bank, and the Fed in particular, stagnant inflation is the worst-case scenario because it would put two of the Fed’s goals — full employment and price stability — in conflict. The Fed could have avoided falling into stagnant inflation had it not insisted last year that inflation was temporary.
But now, the Fed will face a tough decision, he said: “A lot of people say it takes skill and luck, and the Fed needs a lot of luck in this.”
Il Ellen believes that the selling pressure in the stock market has entered a new phase. The market has priced in the risks of inflation, interest rate hikes and a liquidity crunch, but it has yet to factor in the impact of a sharp slowdown in economic growth, so it will fall further.
Led by Target and growth stocks, U.S. stocks pared gains from the previous day on Wednesday, with the Dow Jones Industrial Average falling 1,164 points, its worst performance this year, seemingly echoing what some observers believe is just a “bear market rally”. View.
Investors reacted muted to Walmart’s (WMT-US) bleak pre-market earnings report on Tuesday, but Target’s (TGT-US) pre-market earnings report on Wednesday also mentioned the same problem as Walmart’s inventory buildup, deepening investors’ concerns about a recession. of doubts.
Louis Navellier, founder of Navellier & Associates, said that compared to Walmart, Target is a retailer focused on the U.S. domestic market and should not be affected by the appreciation of the dollar.
Stephen Innes, managing partner of SPI Asset Management, said: “The earnings reports from the industry’s leading players in the retail industry are sending shock waves of stagnant inflation to the market, making the stock market indigestion again.”