David Doyle, head of North American economics at Macquarie, an Australian financial group, believes that the U.S. economy will experience a recession, which may be more severe than the Fed and the market expect, but the Fed will not rescue the stock market when a recession occurs. He also emphasized that the era of the "Fed Put" (Fed Put) is over.

 

The Federal Reserve will announce its latest interest rate decision in the early hours of May 4, Taipei time. The minutes of the Federal Reserve's March meeting showed that its top policymakers expected the U.S. economy to be at risk of a "moderate recession." The outside world also expects that its continuous interest rate hikes for more than a year are likely to plunge the economy into recession.

 

Duerry believes that high inflationary pressures in the United States will worsen the economic situation, leading to a "moderate recession" in the economy, similar to the situation in the early 1990s, and more severe than the Fed expected. At that time, the unemployment rate in the United States was as high as 8%. The U.S. unemployment rate was 3.5% in March this year.

 

Although the U.S. inflation rate in March has dropped from 6% in February to 5%, hitting a new low since May 2021 and shrinking for nine consecutive months, he still believes that the current U.S. inflation rate is not enough to rely on the Fed to sell It is still too high for investors who judge the prospects by right.

 

The Fed put option means that when the U.S. stock market plummets, the Fed will use loose monetary policy to support the economy and the stock market. However, because the current US inflation rate is still considered too high, the Federal Reserve cannot use loose measures to rescue the market in order to fight inflation.

 

Duerry said that in the past 10 years, whenever the stock market fell, there will be buying into the market, mainly because the market believes that when the Fed sees signs of economic weakness, it will take action to rescue the market.

 

But he is not sure whether the Fed will come to the rescue when the economy and the stock market are in trouble in the next 6 to 12 months, and emphasizes that in a high-inflation environment, the Fed's put option is not as strong as it used to be And effective.

 

Since March last year, the Federal Reserve has raised the benchmark interest rate from almost zero to about 5% in order to curb high inflation. Experts warn this could be a drag on the economy.

 

Although there are many signs that the U.S. economy is beginning to weaken, the S&P 500 index has risen by about 6% this year, showing that the market's worries about the economy have subsided. Durry worries that the problem won't go away and will last until the end of the year. (Source: chinatimes0502) ☺

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