We have recently seen struggles in the US Markets as Covid concerns continue to rise in China and the Fed has continued with their interest rate hikes. In major cities such as Shanghai, we have seen a significant increase in Covid cases, as they are experiencing the highest spread of cases since the beginning of the pandemic. Craig Botham, chief Chinese economist, is expecting a recession in China's economy as the government has doubled down on their Covid restrictions
Along with concerns in China, investors are also worried that the Fed may be pushing to far as Fed Chairman Jerome Powell has hinted at increasing short term interest rates by double the usual amount. As a result we have seen a sharp decline of the S&P 500 by 122 basis points and the Dow the down decreased 981 basis points.
This is concerning for consumer confidence as there is increased uncertainty in the market as we are still battling record high inflation. The war in Ukraine is still raging on creating significant uncertainty in many world markets as food and gas prices continue to rise. It will be interesting to see how China plans to manage their "Zero-Covid" strategy and how the effect of lockdowns will continue to effect world economies. I think there is significant concern in the US and we can expect to see increases in prices and may even experience some supply shortages as a result.
Source: https://www.cbsnews.com/news/stock-markets-down-china-lockdowns-fed-hikes-2022-04-25/
While in the short term, the lockdowns in China appear to be helping prices as far as oil is concerned. However, I share your concern that long run prices could rise. If lockdowns are suddenly ended, then I imagine that we'll see a large demand spike in China for a variety of goods, pushing them up worldwide.
ReplyDeleteIt does seem as this is the perfect storm for concern with Covid-19 lockdowns in China, US inflation, and the war in Ukraine. I thought that it was interesting that you brought up supply shortages, I wonder what kinds of shortages may come up as a result of this.
ReplyDeleteI think it will be interesting to see the long-term effects of all of the whole city lockdowns in China. If China continues with their "Zero-COVID" policy, their economy might suffer more.
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