US markets are beginning to fear that they are not even halfway through the bad news that 2022 has in store for them, according to media reports.
The first six months were full of surprises: inflation, the biggest bond sell-off in four decades, a drop in tech stocks rarely matched in history, and the implosion of crypto, the Wall Street Journal reported. .
The looming risk that investors have ignored for months is recession. But it is unclear whether the economy will collapse or be fine. Attempts to assign it a probability range from 90% in a Deutsche Bank customer survey to the spurious accuracy of 4.11% in the New York Federal Reserve’s recession forecasting model.
As investors finally focus on recession-related uncertainty, risks elsewhere in the world could also affect US investors.
Japan could ultimately be forced to cave in and allow bond yields to rise, which would reduce the cash investors in the country had been pouring abroad.
“In Europe, the central bank has promised a new plan to support Italy – but we have seen this spectacle before. If it follows the pattern of too little, too late, we could see a return of the crisis of the Eurozone debt, something the markets are not prepared for,” reported the Wall Street Journal.
Almost all economic results are likely to be another surprise. If there is a soft landing, stocks should do well as the recent recession panic reverses.
If there is a recession, there could easily be a big loss ahead, since only the decline in recent weeks appears to be related to recession risk, according to the report.
(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)