Almost all the talk on the stock market now concerns the Fed's future rate actions. Two major banks, JPMorgan and Goldman Sachs, warned last week that a rate hike to reduce inflation could turn into a recession for the American economy. In particular, Goldman Sachs chief economist Jan Hatzius said that the Fed will have to tighten monetary policy quite a lot, but the more the rate rises, the higher the risk of recession will be. He estimates the probability of its occurrence in the next 2 years at 35%. According to Hatzius, the main task of the Fed is to reduce the gap between jobs and employees and slow down wage growth so that they do not grow by more than 2% per year. He notes that in most cases such processes were observed during recessions. However, a recession is not guaranteed for the American economy, since the Fed will help normalize the situation with prices for long-term goods and labor in the post-pandemic period.
At the same time, the head of JPMorgan Jamie Dimon said that the military conflict in Ukraine could slow down the recovery of the global economy after the pandemic crisis. He noted that in the coming decades, the balance of power in the world could seriously change, and the Fed could raise the key rate much higher in the coming years than the market is waiting for now. Dimon confirmed our opinion that any sanctions against Russia will slow down the economy of the country that introduces them. And also the global economy, because any sanctions mean that business and economic ties are being severed. Consequently, business and production suffer, and GDP will slow down. The head of JPMorgan also noted that in the situation with the war, it makes no sense at all to predict anything for a long period due to its absolute unpredictability. Dimon noted that supply chain disruptions can only get worse due to the military conflict between Ukraine and Russia.
Meanwhile, there is not even a microscopic chance that the conflict between Ukraine and Russia will end in the coming months. Some military experts say that the Russian army has enough weapons for two or three weeks of active fighting. After that, it will probably have to "freeze" the conflict for several years, as it was in 2014 in the Donbas. Kyiv, experts suggest, may launch a counteroffensive sooner or later. It will try to restore its state border. Of course, they can do this only with the help of the weapons of the West and the EU.