Stocks Slide in One of Wall Street’s Worst Weeks This Year

Market-based forecasts for interest rates show traders expect an increase of three-quarters of a percentage point next week. Anything higher would be a hefty move not made since 1984 and could lead financial markets to drop further.

Overall, market prices point to a peak in rates of 4.25 percent to 4.5 percent next year, a full 2 percentage points higher than their current level.

The Fed is not alone in its campaign to elevate interest rates to combat inflation. On Thursday, the World Bank added to recession warnings, saying that the combined effect of central banks all over the world raising interest rates simultaneously could push the global economy into a downturn as soon as next year.

Among the largest U.S. banks, predictions diverge. Economists at Wells Fargo and Citigroup expect recession. David Solomon, chief executive of Goldman Sachs, said on Friday that financial markets “are in a period of lower, longer and bumpier.”

JPMorgan Chase and Morgan Stanley continue to predict a soft landing, in which the Fed is able to to bring down inflation without going too far and causing a recession.

Dan Ivascyn, chief investment officer of the bond investment house Pimco, which manages roughly $1.8 trillion, said he was “a bit more concerned” about just how broad inflation pressures across the U.S. economy are following the release of inflation data on Tuesday.

“Investors can expect a lot more volatility in markets going into year end,” he said. “We think 2023 is still going to be filled with lots of uncertainty.”

Article source: https://www.nytimes.com/2022/09/16/business/stock-market-economy.html