The stock market seems to be at a crossroads. While the Fed’s aggressive rate hikes have pulled down inflation from its summer highs, an uninterrupted hawkishness could trigger a deep recession this year.
The central bank’s rate hikes seemed to pay off as inflation eased in November, with CPI rising 7.1% year-over-year, reflecting that inflation has moderated from its 9.1% peak in June 2022. Inflation has also been lower than expected in October.
However, despite a raft of layoffs, the recent hotter-than-expected jobs data has strengthened the case for the Federal Reserve to continue with its aggressive stance.
According to the minutes of its December meeting, released on Wednesday, the Central Bank expressed its determination to dismiss market sentiments and keep increasing interest rates until inflation is brought back to the desired 2% level.
“Like a deflating holiday lawn ornament, Fed Chairman Jerome Powell’s news conference drained investor hopes of avoiding a recession and showed that history may again prove correct in previously warning of a potential economic downturn,” said CFRA strategist Sam Stovall.
With recession seemingly inevitable, investors are on shaky ground. Speculations of it being either mild or painful have been the talk of late. Amid this backdrop, shares of fundamentally strong businesses, UnitedHealth Group Incorporated (UNH) and…
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