The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid. Furthermore, markets look forward, so it is urgent to encourage production and avoid trade restrictions. Changes in fiscal, monetary, climate and debt policy are needed to counter capital misallocation and inequality.
Due to all this the US stock market took a historic plunge over the first half of the year, and many of the same economic threats still loom as inflation remains sky-high and the Federal Reserve pursues aggressive moves to tame price hikes by raising borrowing costs. This means that the investor sentiment in the market is going to be unstable till the end of 2022. The Federal Reserve’s aggressive rate hike will put even more pressure on the stock markets. As bond yields rising, more investment is going to bond than equity.
Since late 2020, prices have been steadily rising, driving inflation higher. In the 18 months, since the start of 2021, the average global cost of living has increased more quickly than it did over the previous five years combined. The key factors of inflation are increase in food price and crude prices.
Inflation has been predicted to reach 6.6% in advanced economies and 9.5% in emerging market and developing economies, up 0.9 and 0.8% percentage points for FY22. With the global economy only growing by 2.9% next year, interest rate increases are likely to bite but will slow the global price increase.
According to the World Bank’s most recent Global Economic Prospects report, the Russian invasion of Ukraine has exacerbated the COVID-19 pandemic’s effects and the global economy’s slowdown, which could lead to a protracted period of weak growth and high inflation. Also, China lockdown is creating huge business losses globally, as China being the largest population contributor, the demand has dropped, creating losses among the businesses.
What we see now is marginal improvement in the macros, which can be irrelevant currently, as lot of uncertainty still lies like when will the inflation come down? Will we see supply chain running smoothly? When will crude price lower? IS fed rate hike going to stop? Will the stock market get back to it positive sentiments?
For details on Overview of the Equity Markets and Commodity Markets feel free to refer to the following Macro Environment Industry report from CrispIdea.
–By Shreya Shetty and Shejal Ajmera.
Shreya Shetty is an Industry Research Analyst at CrispIdea. She covers industry such as Cyber-security, Ad-Healthcare IT, Cloud, Semiconductor, etc.
Shejal Ajmera is the Head of Research and founder of CrispIdea.