• The risks of prolonged inflation and a global recession are increasing, according to S&P Global in a note.
  • S&P predicted stocks could plunge as much as 14.5% by the middle of next year as inflation remains sticky.
  • “Monetary tightening beyond current expectations could lead to a deeper recession than expected.”

The risks of a longer period of inflation and a global recession are growing, and US stocks could fall another 14% by the middle of next year, according to S&P Global.

“The potential for a prolonged period of higher inflation and weak economic growth is increasing,” S&P Global analysts said in a note Wednesday. “If the Fed’s continued efforts to rein in inflation fail, the US economy could face a hard landing and monetary tightening beyond current expectations could lead to a deeper recession than expected.”

The warning signs continued to flash on Thursday morning shortly after the release of September’s Consumer Price Index report, which showed inflation is higher than expected. The headline CPI reached 8.2% and core inflation hit its highest level in 40 years.

The high inflation reading is raising expectations for another aggressive rate hike by the central bank, which Wall Street experts say could lead to a severe recession and create more headwinds for equities. JPMorgan CEO Jamie Dimon predicted last week that a recession would hit in six to nine months and stocks could plunge another 20%. Others predict an even steeper slowdown, and leading economist Nouriel Roubini warns of stagflation and a crisis in public debt and a 40% sell-off in the stock market.

In addition to slowing the US economy, Fed tightening threatens other economies as a strong dollar exports more inflation overseas as it rises against rival currencies.

In particular, energy-strapped Europe is of concern, as the war between Russia and Ukraine is likely to drag on, putting additional pressure on the supply of energy markets and driving up prices. even higher price.

The research firm estimated that the Fed could raise the fed funds rate to at least 5% to 5.25% by the middle of next year, and will likely stay “higher for longer” relative to expectations. current data – which could cause stocks to fall as much as 14.5% by mid-2023, analysts have warned.