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Wall street’s new fear is that the economy has already peaked

Wall St. Street Sign with American Flags

Wall street, throughout the year, has hoped for much worse and has constantly kept a vigilant approach. But in addition to all its fears, its latest one is rather quite peculiar. Wall street newest fear is that the economy has already peaked and thus investment strategists are now starting to consider a new bearish scenario.

It is no new that Covid 19 had ravaged economy, so much so that stringent lockdowns for months had to be imposed in the economy to mitigate the virulent nature of the pandemic. With burgeoning unemployment and subdued consumer and producer’s sentiments, various fiscal stimulus were rolled out to help ramp up the economy.

But now with somewhat successful mitigation in the ferocious spread of Covid-19’s delta variant, central banks are now talking about tighter monetary policy. This is being done to bring inflation under control as there is a growing sense of worry that financial markets might become too optimistic.

Consequently, the shift in narrative was evident on Monday as S&P 500 futures had lost 1% and small-caps too had taken a beating. Additionally, the main stock benchmark of Europe, too sank more than 2%. This was due to the most severe losses in energy, banks and travel companies. On the other hand, treasuries rallied, with the 10-year yield sliding to 1.23%.

Frank Benzimra, the head of Asia equity strategy at Societe Generale SA, on Bloomberg Television stated that “Peak growth is starting to become a more concerning element,”. He added that “This is actually one of the elements which has pushed us to reduce the allocation into risk assets in our global allocation. You have inflation, but you have also this growth element.”

Wall Street's New Fear Is That the Economy Has Already Peaked

picture credits- Yahoo

On the other hand, in the minds of many investors, the moves represent a pullback in overextended areas of the market.

Various apprehensions rise as earlier, investors had relished in the prospect of a strong worldwide economic rebound. This was fueled by easy money and robust vaccine rollouts campaign. But given the odious combination of price pressures and soaring infection rates, the risk that growth could fall short of rosy forecasts is rising. And, finally, it is to be noted that with global equities teetering at all-time highs, there’s no room for error at this moment of recovery.

About the author

Shivani Khanna

A woman who believes in equal rights and aspires to inspire people through her writings. I aspire to contribute to the economic world and society with diligence and thus being an economic advisor tops my career ambitions . I currently am pursuing Economic honours ( at undergrad level) from delhi university.

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