Bassanese Bites: U.S. recession likely – June 20 2022

Global markets

It was another horror week for global equity (and bond) markets as the previous week’s hotter than expected U.S. consumer price index report led to fears that the Fed would hike by 0.75% at last week’s meeting. Following a well-timed media leak, those fears were realised. The Fed’s updated ‘dot plots’, moreover, suggested a further 1.75% worth of rate hikes this year, taking the mid-point of the Fed funds target range from 1.6% to 3.4%. That’s a full 1.5% more than the Fed expected back in March. Of course, not to be outdone, the market still reckons the Fed will do a bit more – with a year-end Fed funds expectation of 3.6%.

As evident in the chart below, the broad trend in equities remains to the downside, with trends in bonds yields, the US dollar and energy prices still to the upside. That said, fears of slowing global growth due to rate hikes appeared to sap the strength of oil prices last week.

Click to read the Full Report