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That hope is under threat, as the Federal Reserve rolls out a plan to raise borrowing costs by rapidly raising interest rates to curb some lending, consumer spending, business investment and demand for labor. -work.
Despite various challenges, the most optimistic market participants predict that employers, workers and consumers could experience a so-called “soft landing” this year, during which the Fed will raise borrowing costs, helping the economy inflation and wage growth to moderate without a painful recovery-killing slowdown: strategists at Morgan Stanley, for example, expect real wages to turn broadly positive by mid-year, outpacing price increases, as inflation declines and wage rates maintain some strength. It could also be a boon for equities.
“It is possible that over the next few quarters the labor market will continue to be tight despite the Fed hike,” said Andrew Flowers, labor economist at Appcast, a technology company that helps companies target workers. recruitment advertisements. He still sees an “overwhelming appetite” for hiring.
Although the particularly low unemployment rate is not generally a bullish sign for equities, some recent years have reversed the trend. In 2019, when the S&P 500 returned to around 30%, unemployment at the end of the year had fallen to 3.6%, which is in line with current levels.
In such an uncertain environment, the forecasts for the evolution of equities between now and the end of the year are varying widely among major Wall Street firms. By several technical measures, the trajectory of the market is currently close to “hit or miss“levels.
SOEs have “become massively efficient, so from an operational performance perspective, they’ve been able to afford those extra costs,” said Brian Belski, the Chief Investment Strategist at BMO Capital Markets. Mr Belski’s bank outlook is among the most confident, with a call that the S&P 500 will end 2022 at 5,300 – 23% above Monday’s close and well above most estimates.
“At the end of the day, I think for the economy, it’s good that we see those kinds of salaries,” he said. “Never bet against the American consumer, ever.”