Macroeconomy, inflation a ‘driver’ of risk preference at the CEO, board level: Mark Shafir
Citi Co-Head of Global Mergers and Acquisitions Mark Shafir discusses his outlook for the M&A and IPO market.
The U.S. economy could be headed for a "no landing" scenario thanks to the hot labor market, but that might not be good news for the stock market, according to Bank of America analysts.
In an analyst note published Friday, Bank of America chief economist Michael Hartnett predicted a "no landing" scenario in the first half of the year, where there is no immediate slowdown in growth but inflation remains above trend. That would likely force the Fed to raise interest rates much higher than previously forecast — and keep them elevated for longer.
"No landing means no Fed pausing," Hartnett wrote, warning that central bank tightening "always breaks something." He projected the S&P 500 could tumble nearly 7% by early March as a result.
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The continuation of the Fed's aggressive campaign to raise interest rates likely means that a "hard landing" outcome — in which the economy tumbles into a recession — will follow in the latter part of 2023, he said.
The gloomy forecast comes after a brutal year for the stock market, its worst since the 2008 financial crisis. All three indexes tumbled in 2022, snapping a three-year win streak.
The Dow Jones Industrial Average ended the year down 8.8%, the best of the three. The S&P 500 sank 19.4%, while the tech-heavy Nasdaq composite plunged 33.1%.
Stocks initially rallied in early 2023, although equities have lost some of that momentum amid rate-hike fears. The S&P closed Friday up about 6.67% from the start of the year, but down about 0.83% for the week.