,” noted Kolanovic, reprinting a January 2007 note from his bank warning about the lingering impact of higher rates to prove his point.don’t foresee, but Kolanovic says several signs are more urgent today than they were then, such as a fivefold greater increase in the federal funds rate over the last 18 months compared to the rate hike between 2002 and 2008, a more global tightening of monetary policy and a “disproportionate” impact of higher rates on smaller businesses.
Kolanovic suggests several factors—such as consumers having more savings, and home buyers and corporate borrowers locked into loans at far lower rates available today—are causing “lags” to see the full impact of rate hikes. The bearish Kolanovic suggested clients should shun equity and credit investments for fixed income “as long as interest rates remain in deeply restrictive territory and the overhang of geopolitical risks persists,” nodding to Russia’s ongoing war in Ukraine and other global unrest that have sent oil and other commodity prices surging.“Can AI change the economy and offset the negative impact of inflation and interest rates? We think no,” Kolanovic wrote.
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