The Hot Job Market, a financial relief, is a Wall Street concern

This hope is threatened as the Federal Reserve continues with a plan to increase borrowing costs by rapidly raising interest rates to limit lending, consumer spending, business investment and labor demand.

Despite various challenges, the most optimistic market participants predict that employers, workers and consumers may experience a so-called “soft landing” this year, where the Fed increases borrowing costs, helping inflation and wage growth to moderate without a painful downturn. the rise: Morgan Stanley strategists, for example, expect overall wages to be positive overall by the middle of the year, surpassing price increases, as inflation declines and wage rates maintain some strength. It can be a boon for stocks as well.

“It’s possible that the labor market will continue to be tight over the next few quarters despite the Fed increase,” said Andrew Flowers, a labor economist at Appcast, a technology firm that helps companies target recruitment ads. He still sees an “overwhelming appetite” for hiring.

Although particularly low unemployment is not usually a bullish sign for equities, some of the recent years have counteracted the trend. In 2019, when the S&P 500 gave a return of approximately 30 percent, unemployment had fallen to 3.6 percent by the end of the year, in line with the current level.

In such an uncertain environment, the forecasts for how equities will perform by the end of the year vary widely among the best Wall Street companies. With several technical measures, the market’s path is currently close to “make or break” levels.

Public companies have “become enormously efficient, so from an operating profit, they have been able to bear these extra costs,” said Brian Belski, investment strategist in BMO Capital Markets. The outlook from Mr. Belski’s bank is among the most secure, with a call for the S&P 500 index to close in 2022 at 5,300 – 27 percent over Tuesday’s closing, and far above most estimates.

“At the end of the day, I think it’s good for the economy that we’re seeing this kind of pay,” he said. “Never bet against the American consumer, never.”

Source link

Back to top button