In today’s briefing:
- Is The US Fed Tightening Into A Big Recession?
- Corporate America Faces Stiffer Headwinds as Demand Outlook Falters and Higher Input Costs Persist
Is The US Fed Tightening Into A Big Recession?
- Latest FOMC meeting sounded ‘surprising’ dovish, but this is less surprising if we consider the US Fed is only six months away from a probable policy pivot
- Evidence seems to confirm the US and World economies are already in recession. This will get worse because a major Global Liquidity shock has already been delivered
- This looks like a bear market rally. Bears have two down-legs, split by an often vicious spike. Effects of a bigger recession on 2H, 2022 profits needs to be discounted
Corporate America Faces Stiffer Headwinds as Demand Outlook Falters and Higher Input Costs Persist
- The Fed’s baseline policy outlook suggests a tougher operating environment for Corporate America. Investors should focus on downside risks to corporate profits, particularly in those sectors with limited pricing power.
- Weakening demand is the main source of risks for US corporations, particularly in consumer discretionary sectors. Capital spending will not be immune to softer economic conditions.
- Elevated energy prices could remain a source of input cost pressures into 2023. The US labour market remains tight. Upward pressure on wages is likely to persist until 2023 H2.
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