How does the market react after inflation peaks ?

7 Ara 2022

Hi guys, today I bring you an important point for macro analysis.

Many believe that seeing a significant improvement in economic data, especially those linked to inflation, showing that it is slowing down is something positive, is it really?

In a way, it's a positive metric when looked at in isolation, because inflation brings major disturbances to the economy, but that's a topic for another post.

What matters is that the mere fact that inflation has marked a possible peak and the Fed has started to reduce interest rates does not mean that we are going to have a bottom in the market!

Currently big banks are warning about the recession, and this for us, is not news, but look at this headline: "Jamie Dimon, CEO of JPMorgan Chase, talks of recession next year"

But here we had already been talking about this recession for some time, after publishing a study talking about the inversion of the yield curve, in that study there was the following sentence: "According to the data available on the Federal Reserve website, the inversion of the yield curve preceded all American recessions since 1950, with the exception of a false signal in 1967."

This publication was made on the

So, yes, we have a contracted recession, but what does that have to do with peak inflation?

Inflation brings, as a consequence, a scenario of uncertainties in the economy, and discourages new investments from being carried out. In practice, this causes difficulties for the country's economic growth, and once we have this combined with high interest rates, growth becomes even more difficult.

So, even though inflation has reached its peak, interest rates are still very high, and we continue to struggle with economic growth and this usually happens, see the chart, after inflation peaks we had big drops.



Will we see something similar again?

Tell me your opinion here!