Central banks are raising interest rates in response to high inflation. This, in turn, fuels fears of a recession. But it also opens up opportunities for investors – from basic consumption to alcohol.
The negative headlines on the global financial markets are not coming to an end. Such recently included the data on US inflation for the month of June, which showed a strong increase. In a year-on-year comparison alone, consumer prices increased by 9.1 percent, more than expected.
In any case, the development should have a significant impact on US monetary policy, states Johannes Mayr, chief economist at Eyb & Wallwitz. He says “the June data hasn’t eased the Fed’s inflation concerns.” Mayr stretches the bow to the upcoming meeting of the central bank Fed on July 27 and says a big rate hike of 0.75 percentage points is now on the cards. Even before the June figures were published, most market observers had expected a smaller step.
The Fed had already raised the key rate by 0.75 percentage points at the June meeting – the sharpest increase since 1994. But apparently the monetary watchdogs on the other side of the Atlantic have to take an even tougher stance in order to fight inflation – a circumstance that at the same time also stirs up fears of recession: “The pressure on the economy has increased significantly and will continue to intensify, driven by the considerable loss of purchasing power and the already significant tightening of financing conditions,” emphasizes the Eyb & Wallwitz expert. High energy costs are also a burden.
In view of all such developments, many investors could remain unsettled, so major market fluctuations are likely to persist. Mayr believes that a change in sentiment requires a convincing downward trend in core inflation and more dovish tones from the US Federal Reserve. “Both are not yet recognizable.”
Of course, that leaves the question of where it is opportunities on the stock market in the current environment could give. After all, not every sector suffers equally from the negative scenario, adds Thorsten Schrieber, board member of DJE Kapital AG. Some sectors of the economy are proving to be more resistant to crises. But what could that be?