Mixed Signals From Wall Street: What Investors Should Know About Rates & Recession Risk
By Happy hump day, readers![0] I'm Phil Rosen, senior reporter from Manhattan, and today we're taking a closer look at the mixed signals Wall Street is sending out regarding the economy and the impact it could have on investors.
Yesterday's release of the Consumer Price Index (CPI) showed that inflation climbed 0.5% in January, slightly higher than expected, and year-over-year it slowed to 6.4%.[0] This reading was nothing to call home about, but it suggests the disinflationary idea Jerome Powell has alluded to is going to be more complicated than a straight line.[0] Prices aren't cooling down as smoothly or quickly as anyone wants, especially the Fed.[0]
The US Federal Reserve is presented with a dilemma in light of January's impressive jobs report, which could have a negative effect on investors' financial portfolios.[0] JPMorgan's Marko Kolanovic commented that despite the strong economy, markets are overpricing recent good news on inflation and are complacent of risks.[0] Morgan Stanley Wealth Management investment chief Lisa Shalett also warned that Fed policy is going to pull stocks lower.[0]
Nicholas Colas, cofounder of DataTrek Research, noted that the New York Fed's Recession Probabilities model, which uses the difference between three-month and 10-year Treasury yields, indicates that there is a 57% chance of a recession taking place within the next year.[0] Goldman Sachs CEO David Solomon has also cautioned that the Fed may need to raise interest rates higher for longer to combat inflation.
With the Fed expected to continue raising interest rates, investors may want to reconsider their portfolios and the potential impact of rising interest rates. Do you think the January CPI report impacts your investment outlook for 2023?[0] Tweet me @philrosenn or email me prosen@insider.com to let me know.[0]
0. “Wall Street giants say it's time to ditch stocks ahead of a recession” Business Insider, 15 Feb. 2023, https://www.businessinsider.com/wall-street-morgan-stanely-kolanovic-stocks-markets-banks-jpmorgan-investing-2023-2
