What’s next
Wade no longer believes that a recession is the most likely scenario for the US economy, but says that as the full impact of higher interest rates is felt, “unemployment will rise and growth will slow — it will feel quite a bit like a recession, even if it doesn’t correspond to the technical definition of a recession with two consecutive quarters of negative GDP growth”.
He does not feel that rates will rise further in the US, as policymakers will observe the impacts of the rate increases that have already taken place as they come through in the months ahead and thinks those will be sufficient.
Caldwell says that to enable inflation to fall, “a modest slowdown in the economy may be necessary”, and that rates will rise for as long as it takes to make this happen.
Wilding believes that inflation may be “sticky” from here as workers wages are still “catching up”, not just with the current inflation rate, but with the previous rate of inflation, which acted as a real-terms pay cut for many.
She says only a rise in unemployment can calm wage pressures in the economy, and expects rates to increase until this happens.
Whatever comes next for the US economy, the impacts will be felt by advisers and their clients in all asset classes.
David Thorpe is investment editor at FTAdviser
