With a miserable first half for the stock market now in the history books, investors are assessing whether the US economy can avoid a significant downturn as the Federal Reserve raises rates to fight the worst inflation in decades.
The answer to that question stands to have a direct impact on markets. Strategists say an economic slump coupled with weak corporate earnings could push the S&P 500 lower by at least another 10 per cent, compounding losses that have already pushed the benchmark index down 18 per cent so far this year.
Conversely, in a scenario that includes solid profit increases and moderating inflation, stocks could bounce to around where they started the year, according to some analysts’ price targets.
For now, "investors are anticipating that we are seeing a slowdown", said Lindsey Bell, chief markets and money strategist at Ally. "The big question is how deep is this slowdown going to be?”
The case for an imminent economic downturn took a hit on Friday, after a Labour Department report showed employers hired far more workers than expected in June, giving the Fed ammunition to deliver another 75 basis-point interest rate hike this month.
"The June employment report indicates that the economy is neither on the cusp of a recession — much less already in one — nor in an overheated state," Oxford Economics said in a note.
It predicted more market volatility "amid heightened speculation over what the Fed will do".
More key information on the course of the economy is expected later this month, as second-quarter earnings reports flood in over the next few weeks and investors parse fresh data, including Wednesday’s closely-watched consumer prices report for June.
Though the Fed has said it is confident in achieving a so-called soft landing by bringing down inflation without upsetting the economy, some investors believe this year’s steep stock declines suggest a degree of economic slowdown is already baked in to asset prices.
The S&P 500, for instance, has fallen as low as 23.6 per cent from its January record high this year, in line with the 24% median decline the index has registered in past recessions, indicating that "at least some of the challenging environment is reflected in stock prices," Keith Lerner, co-chief investment officer at Truist Advisory Services, said in a report.
Recessions are officially called in hindsight, with the National Bureau of Economic Research declaring one when there has been a "significant decline in economic activity that is spread across the economy and lasts more than a few months".
Competing scenarios
Forecasts vary for how rocky the economy can get.
A note outlining various economic scenarios from UBS Global Wealth Management said the S&P 500 could fall to 3,300 — some 31 per cent from its January high — if an economic slump leads to a steep drop in corporate earnings, as well as in the case of "stagflation," which typically involves a cocktail of persistently high inflation combined with slow growth.
The bank's analysts gave a 30 per cent chance for the "slump" scenario, and pegged the chances of stagflation at 20 per cent.
A "soft landing" scenario is their most likely outcome, however, and would include the S&P 500 finishing the year at 3,900 — right around where it closed on Friday.
Such a scenario, to which UBS assigned a 40 per cent weighting, depends on investors believing that inflation is under control and earnings can remain resilient despite tighter financial conditions, they said.
In a recent note outlining the "increasing likelihood of a stagflationary environment," strategists at BofA Global Research recommended investors combine areas of the stock market that would benefit from inflation, such as energy, with defensive sectors like healthcare.
Wells Fargo Investment Institute strategists, meanwhile, earlier this week called for a “moderate US recession” and lowered their year-end S&P 500 target to a range of 3,800-4,000.
Some investors hold a more optimistic view of the economy and believe stocks could head higher from current levels.
Citi's strategists weighted a "soft landing" scenario at 55 per cent, although they also saw a 40 per cent chance of a mild recession and a 5% chance of a severe one. Their year-end S&P target is 4,200.
John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, this week lowered his S&P 500 price target to 4,800 from 5,330 that he had initiated in December — with the new level still 23 per cent above where the index closed on Friday.
He expects consumer demand, business investment and government spending to support growth.
"It’s a resilient economy," Mr Stoltzfus said.
QUARTER-FINAL
Wales 20-19 France
Wales: T: Wainwright, Moriarty. Cons: Biggar (2) Pens: Biggar 2
France: T: Vahaamahina, Ollivon, Vakatawa Cons: Ntamack (2)
Other key dates
-
Finals draw: December 2
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Finals (including semi-finals and third-placed game): June 5–9, 2019
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Euro 2020 play-off draw: November 22, 2019
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Euro 2020 play-offs: March 26–31, 2020
Everybody%20Loves%20Touda
%3Cp%3E%3Cstrong%3EDirector%3A%3C%2Fstrong%3E%20Nabil%20Ayouch%C2%A0%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarring%3A%3C%2Fstrong%3E%20Nisrin%20Erradi%2C%20Joud%20Chamihy%2C%20Jalila%20Talemsi%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E4%2F5%3C%2Fp%3E%0A
Blackpink World Tour [Born Pink] In Cinemas
Starring: Rose, Jisoo, Jennie, Lisa
Directors: Min Geun, Oh Yoon-Dong
Rating: 3/5
McLaren GT specs
Engine: 4-litre twin-turbo V8
Transmission: seven-speed
Power: 620bhp
Torque: 630Nm
Price: Dh875,000
On sale: now
ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
LIGUE 1 FIXTURES
All times UAE ( 4 GMT)
Friday
Nice v Angers (9pm)
Lille v Monaco (10.45pm)
Saturday
Montpellier v Paris Saint-Germain (7pm)
Bordeaux v Guingamp (10pm)
Caen v Amiens (10pm)
Lyon v Dijon (10pm)
Metz v Troyes (10pm)
Sunday
Saint-Etienne v Rennes (5pm)
Strasbourg v Nantes (7pm)
Marseille v Toulouse (11pm)
The figures behind the event
1) More than 300 in-house cleaning crew
2) 165 staff assigned to sanitise public areas throughout the show
3) 1,000 social distancing stickers
4) 809 hand sanitiser dispensers placed throughout the venue
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Where can I submit a sample?
Volunteers can now submit DNA samples at a number of centres across Abu Dhabi. The programme is open to all ages.
Collection centres in Abu Dhabi include:
- Abu Dhabi National Exhibition Centre (ADNEC)
- Biogenix Labs in Masdar City
- Al Towayya in Al Ain
- NMC Royal Hospital in Khalifa City
- Bareen International Hospital
- NMC Specialty Hospital, Al Ain
- NMC Royal Medical Centre - Abu Dhabi
- NMC Royal Women’s Hospital.
Pakistan Super League
Previous winners
2016 Islamabad United
2017 Peshawar Zalmi
2018 Islamabad United
2019 Quetta Gladiators
Most runs Kamran Akmal – 1,286
Most wickets Wahab Riaz –65
More from Rashmee Roshan Lall
Leap of Faith
Michael J Mazarr
Public Affairs
Dh67
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
The fake news generation
288,000 – the number of posts reported as hate speech that were deleted by Facebook globally each month in May and June this year
11% – the number of Americans who said they trusted the news they read on Snapchat as of June 2017, according to Statista. Over a quarter stated that they ‘rarely trusted’ the news they read on social media in general
31% - the number of young people in the US aged between 10 and 18 who said they had shared a news story online in the last six months that they later found out was wrong or inaccurate
63% - percentage of Arab nationals who said they get their news from social media every single day.
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
If you go
Flying
Despite the extreme distance, flying to Fairbanks is relatively simple, requiring just one transfer in Seattle, which can be reached directly from Dubai with Emirates for Dh6,800 return.
Touring
Gondwana Ecotours’ seven-day Polar Bear Adventure starts in Fairbanks in central Alaska before visiting Kaktovik and Utqiarvik on the North Slope. Polar bear viewing is highly likely in Kaktovik, with up to five two-hour boat tours included. Prices start from Dh11,500 per person, with all local flights, meals and accommodation included; gondwanaecotours.com
EA Sports FC 25
Developer: EA Vancouver, EA Romania
Publisher: EA Sports
Consoles: Nintendo Switch, PlayStation 4&5, Xbox One and Xbox Series X/S
Rating: 3.5/5
Ziina users can donate to relief efforts in Beirut
Ziina users will be able to use the app to help relief efforts in Beirut, which has been left reeling after an August blast caused an estimated $15 billion in damage and left thousands homeless. Ziina has partnered with the United Nations High Commissioner for Refugees to raise money for the Lebanese capital, co-founder Faisal Toukan says. “As of October 1, the UNHCR has the first certified badge on Ziina and is automatically part of user's top friends' list during this campaign. Users can now donate any amount to the Beirut relief with two clicks. The money raised will go towards rebuilding houses for the families that were impacted by the explosion.”
OPINIONS ON PALESTINE & ISRAEL
