The director of the IMF’s monetary and stock markets has predicted that a change in investor sentiment may result in a 30% drop in U.S. equity markets.
Tobias Adrian: Hazard Premia Have Led To Orderly Adjustment
At the 2022 Regular Conferences of the IMF and the World Bank Organization in Washington, DC. Tobias Adrian informed CNBC’s Geoff Cutmore that IMF research revealed. Increasing interest rates and future revenue forecasts were pulling down firm assessments in the present market downturn.
“Pretty well” sentiments and hazard premia have thus far led to “orderly adjustment,” he said on Tuesday. When asked if he agreed with JPMorgan Chase CEO Jamie Dimon’s recent CNBC broadcast. He predicted the Stock price would drop another 25%, Adrian responded that such a drop was “absolutely plausible.”
Since the beginning of the year, the stock index has been down by about 25%.
To slow annual inflation of 8.3 percent. The Reserve Bank of the United States hiked its lending rate from 3 percent to 3.2 percent in September.
New inflation data for the United States will be released on Thursday.
“I think whatever Jamie Dimon is alluding to when he talks about a possible shift in mood is that. It would also naturally have a multiplier impact on economic activity, “That’s what Adrian had to say.
“Twenty percent, on the other hand, is not out of the question. That’s not where we usually start, but it is feasible.”
In addition, Adrian mentioned that the IMF’s benchmark was one in which financial conditions remained tightened, and business output slowed. Markets remained under pressure but did not provide a specific number for this scenario.
The organization released its World Financial Outlook on Tuesday. It predicted a global slowdown in development to 2.6% in 2019 (down from the 3% forecasted in July).
Moreover, it predicted that in 2023. A third of the world’s businesses would see a recession, causing it to feel like a downturn for millions of people.
Increasing Likelihood Of a Crisis
Adrian told Reporters that the International Monetary Fund’s benchmark remains that international credit markets continue “in an orderly fashion.” And will not shift into a complete catastrophe on the magnitude of a “Lehman moment.” Despite previous instability in areas like U.K. treasury securities.
The threats, he cautioned, are substantial. “Extremely high [risks to economic stability] currently exist. In times of severe crisis, like the Great Recession of 2008, the Covid turmoil of 2020, or the banking crisis of the 2010s.
“Yes, this is a highly stressful time, and we pray that the financial sector can avoid a systemic crisis. However, the chances are much higher now.”
He pointed out that banks now have more investment and cash flow than they did during the 2008 economic crisis. Then the financial sector was a significant source of extreme stress.
However, in a worst-case scenario for emerging markets, 30 percent of banking assets would be underfunded. Security flaws in the non-bank monetary sector could spread toward the banking sector.
