Stagflation in US economy is ‘unavoidable,’ famed economist El-Erian says
New York PostMay 19, 2022
Global stock markets fell on Tues., erasing the previous day's gains, as analysts and investors grappled with mixed economic reports, corporate earnings, and recession fears.
The positive rally on Mon. had seemed to rescue markets from the prospect of a prolonged bear market - a downward correction of 20% or more from recent highs. However, for current markets, that peak was reached in Jan., and trading dipped into bear territory on Fri. before a late afternoon correction.
Growth is collapsing while inflation is rising and the Fed has lost control of the underlying risks in the US economy. The US is headed towards "stagflation" - when inflation remains high and growth remains stubbornly low - and likely recession. The worst part is: markets haven't even "priced-in" that slowing growth yet, so stocks have much further to fall.
Bear markets and bull markets are cyclical, and recessions historically only last for 12 to 16 months. Equities - including new digital assets in the crypto space - have already seen a steep correction and there are opportunities out there for investors who can withstand temporary volatility.
There are only two ways to stop raging inflation: either the Fed moves even more aggressively to raise interest rates or the stock market collapses and destroys consumer demand. If the Fed doesn't do its job, the markets will do it for them.