Bassanese Bites: Recession watch – May 23 2022
Global equities weakened further last week, although not due to another surge in bond yields. Rather, it was due to signs of a weakening in corporate earnings from two major US retailers, Target and Walmart. That said, most Fed speakers (including Powell) continued to talk tough, suggesting they are still intent on hiking rates by 0.5% next month. Another chunky 0.5% hike is still likely in July.
As for Wall Street weakness, to date, the Fed seems unfazed. Indeed, weaker stocks appear part of the transmission mechanism to lowering demand via a tightening in financial conditions and negative wealth effects.