Bank of America’s numbers suggest that an upcoming recession is, by no means, a certainty.
The stock market panicked Friday after the release of last month’s inflation report, which showed May prices rising 8.6% year-over-year. Even when excluding food and energy prices, which tend to fluctuate more, annual inflation sat at a robust 6%. Each of the major stock indices slumped Friday on the news. By Monday’s close, stocks had plunged even further, officially dragging the S&P 500 into bear market territory. Inflation began rising last year after the pandemic economy reopened and supply chain snarls snaggled various markets. Now, almost a year since the first echoes of inflation tickled the economy, we’re barreling along at the fastest rate seen since 1981. To combat this 40-year-high price growth, the Federal Reserve has already instituted 0.25% and 0.5% rate hikes this year. But now, after stating that higher hikes weren’t in the cards, it’s looking increasingly likely that the Fed could spike rates an additional 0.75% this week. Unfortunately, all these inflationary pressures, interest rate hike fears and uncertainty stemming from the Russia-Ukraine war have taken their toll. Despite a tight labor market, many consumers aren’t feeling too happy about current economic conditions. Many—consumers, investors and analysts alike—have worries about a potential recession on the horizon. But this week, the Bank of America offered some comforting words: At the moment, a full-blown recession may not be as likely as many believe. The Bank of America’s earlier sentiments trickled out Friday, courtesy of Chief Investment Strategist Michael Hartnett. According to Hartnett, the bank’s in-house bull and bear indicator resides deep in “contrarian bullish” territory. Hartnett also noted that, “we’re in a technical recession [now], but just don’t realize it.”
Hartnett’s take on current consumer data and household balance sheets indicates that a “shallow” recession lies ahead. He counted price spikes in food, natural gas (and other energy sources) and housing among those leading the inflation charge.
