Clear weather returns to Wall Street for the moment today after last week it was the worst since last fall for the Dow Jones, with a negative balance of over 3.5% and volatility on the rise. However, there are those who see clouds gathering on the horizon and those of last week as signs of a far more ambia correction on the way. It is about Mark Zandi, chief economist di Moody’s Analytics, which sees a significant correction looming, between 10 and 20%, with the subsequent rise which will be much more difficult than the fast one shown by the markets after the collapse of March 2020. This is because today we are facing very, high, ‘too much’ valuations according to Zandi, and therefore the markets could take up to a year before recovering.
“Headwinds are building up for the stock market,” Zandi told CNBC. The Federal Reserve has to shift gears because the economy is very strong ”. Zandi’s prediction is that the economy will avoid a new recession because the decline will be more about the excessive rise in the prices of risky assets than a serious fundamental problem. “I would not count on rates that will remain at 1.5% for very long given what is happening,” he added.
Zandi’s alert also concerns other assets such as commodities and cryptocurrencies. Furthermore, the sustainability of the housing market could be jeopardized by higher mortgage rates.
“Inflation will be higher than it was before the pandemic,” Zandi said. “The Fed has been struggling for at least a quarter of a century to push inflation up, and I think they will be able to get it.”