Both the impending global trade war as well as current inflation data and data on the mood of US consumers are currently burdening the markets. Against this background, the Misery Index also increases.
• tariffs deteriorate the mood
• Fed raises inflation forecast and lowers economic growth forecast
• Misery Index increases gradually
Effects of Trump’s tariffs
According to the InG, with a view to the US consumer expenditure in February and the consumer climate in March, it was said that by US President Donald Trump’s tariffs and cuts in government spending trends such as the increase in inflation and falling consumption expenditure, DPA-AFX reports.
In the meantime, according to Marketwatch, Fed boss Jerome Powell indicated that the inflation caused by the tariff could only be “temporarily” and remains to be seen how the increased uncertainty about economic outlook would affect expenses and investments.
Economic data at a glance
A recent evaluation of “soft” economic data recently showed that consumer confidence had dropped to a four -year low. “The survey data show that people are dissatisfied,” says Marketwatch Emily Roland, co-cheflague strategist at John Hancock Investment Management. According to Roland, the data in the USA is generally neither “great” nor “bad.”
According to Marketwatch, unemployment recently indicated a less robust labor market, but not to a stagnating economy. In the meantime, inflation lies above the target value of the Fed of 2 percent, but has weakened since its maximum level of almost 9 percent.
Fear of stagflation increases
The US Federal Reserve recently left the key interest rate unchanged and raised the inflation forecast while corrected the economic growth forecast. On Wall Street, this caused renewed rumors about a stagflation. “The fear of stagflation increases and will restrict the ability of the US Federal Reserve Fed to further reduce interest rates,” said ING experts.
“Stagflation frightens most investors,” says Marketwatch Adam Hetts, portfolio manager and global director for multi-asset investments at Janus Henderson. “It has become such a hot topic because tariffs are bad for growth and bad for inflation,” said Hetts.
Misery Index increases
Against this background, the Misery Index, which forms the sum of inflation rate and unemployment rate, also creeped creeping according to the deep stalls of the past five years, as Marketwatch reports. According to Steve Hanke, Professor of Applied Economics at John’s Hopkins University, the index also offers a way to “keep your finger in the wind in recent versions to get a feeling for how people are doing”. With a value of 6.9, the Misery Index lies significantly below its maximum of 15 at the beginning of the Corona crisis, but still above the value of ten years ago. Trump’s procedure for tariffs has worsened the mood among consumers and companies and increased the concern that the plans for “detoxification” of the US economy could plunge the USA into a recession, reports Marketwatch.
Steve Hanke from Johns Hopkins University therefore advises investors to keep an eye on the index, while portfolio manager Adam Hetts warns that every possible combination of higher inflation and increased unemployment could lead to a toxic situation in which “nothing would work in a simple wealth division”.
Editor finance.net