On Tuesday, Fed Governor Lael Brainard and San Francisco Fed President Mary Daly emphasized the central bank’s commitment to fighting inflation through higher interest rates. Raising rates “is what is necessary to ensure that again, [you] go to bed at night, you’re not worrying about whether prices will be higher, considerably higher tomorrow,” Daly added. That same day, Deutsche Bank warned that the Fed’s fight against inflation will spark a recession in the U.S. late next year. “The U.S. economy is expected to take a major hit from the extra Fed tightening by late next year and early 2024,” economists said. “We see two negative quarters of growth and a more than 1.5% point rise in the U.S. unemployment rate, developments that clearly qualify as a recession, albeit a moderate one.”

 

CNN Business/Matt Egan
Deutsche Bank is the first big bank to forecast a US recession

The Federal Reserve’s fight against inflation will spark a recession in the United States that begins late next year, Deutsche Bank warned on Tuesday.

The recession call — the first from a major bank — reflects growing concern that the Fed will hit the brakes on the economy so hard that it will inadvertently end the recovery that began just two years ago.

“We no longer see the Fed achieving a soft landing. Instead, we anticipate that a more aggressive tightening of monetary policy will push the economy into a recession,” Deutsche Bank economists led by Matthew Luzzetti wrote in the report.

Read the full story, here.

 

CNBC/Jeff Cox
Key people from the Fed just spooked the markets — here’s what they said

If there was any question about where the Federal Reserve stands on the key issue of the day — inflation — two important officials brought even more clarity on Tuesday.

Fed Governor Lael Brainard and San Francisco Fed President Mary Daly both issued comments that showed they envision higher rates and, in the former’s case, an aggressive drawdown of the assets the central bank is holding on its balance sheet.

Investors didn’t particularly like what they heard, sending major averages considerably lower on the day and the 10-year Treasury yield to a new 2022 high.

You can read the entire article, here.

 

Fortune via Yahoo News/Bernhard Warner
Goldman Sachs’ grim message for investors: Your portfolio will flatline this year—and that’s if you’re lucky

As investors brace for the kickoff of the Q1 earnings season next week, there are plenty of signs that returns will be particularly hard to come by for the rest of the year.

Over the weekend, Goldman Sachs gave clients a best-case, worst-case scenario for stocks—and even the glass-half-full take looks pretty lousy. The Goldman team, led by chief U.S. equity strategist David J. Kostin, reiterates it sees the benchmark S&P 500 closing at 4,700 at year-end. That would imply stocks are set to rise only a further 4% this year.

A 4,700 handle would be a bit of a jolt to investors, as the S&P closed out 2021 at 4,766.18.

Remember: That’s Goldman’s best case.

And its worst?

Well, you can find out, here.

 

 

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