While stock traders seem to be optimistic again as the S&P 500 slowly rallies about 5% over the course of the week, analysts and billionaire investor Carl Icahn are still skeptical of the upcoming economic outlook. Icahn is still deeply hedging for a down-turn and says,
“I have kept everything hedged for the last few years. We have a strong hedge against the long positions and we try to be activist to get that edge… I am negative as you can hear. Short term I don’t even predict.”
Just because the market has moved in an upward trend this last week, it does not mean we are in the clear. Major economic concerns like inflation, global tensions and cost of
CAN THE FEDERAL RESERVE FIGHT INFLATION?
At this point it’s no secret that inflation has reached a 40-year high at nearly 8%. In response to the dangerously high inflation, the Federal Reserve has begun raising interest rates for the first time in three years. In the latest Federal Reserve meeting, Jerome Powell announced that they will continue to raise rates to fight inflation and bring it back down, hopefully starting mid 2022 and into 2023. Historically, inflation typically wavers between 1.6% to 2.3%, so it’s not surprising that investor Carl Icahn remains skeptical. In response to the Federal Reserve’s approach to driving inflation back down the investor warns,
“I really don’t know if they can engineer a soft landing. I think there is going to be a rough landing… Inflation is a terrible thing when it gets going.”
Former Chase Chief Economist Anthony Chan also agrees that there is a high chance of a recession on the horizon.
With everything we know now, the chance of recession seems to be increasingly more likely compared to just a year ago. The combination of record high inflation and global tensions between Russia and Ukraine continue to create market uncertainty. Despite the Federal Reserve’s recent announcement of increasing rates, there are concerns that the Fed has waited too long to tackle inflation and it may be more difficult than expected to fix the damage that has been done. Investor Carl Icahn says, “I think there very well could be a recession or even worse.”