The stock market has been witnessing volatile swings due to the double whammy of red-hot inflation and the Fed’s interest rate hikes, coupled with geopolitical tensions. However, a series of positive economic data boosted investors’ confidence.
However, with inflation still at an elevated level, the Fed is expected to continue its aggressive rate hikes until it succeeds in bringing down inflation to the 2% target, thus increasing the risks of a recession. According to veteran economist Mohamed El-Erian, even though the labor market, consumer spending, and business earnings are strong; the risk of a recession “is getting higher and higher” due to the inflation beast.
