Stock market outlook: Deflation to hit earnings, stock prices

Markets have interpreted that as positive news for stocks, as cooler inflation in the economy could lead the Federal Reserve to soon pause rate hikes or even cut interest rates.

But it takes around 12 months for the full effect of rate hikes to surface in the real economy, Wilson said. That could mean inflation will cool much faster than expected, to the point where prices actually begin falling. The result could end up being not just disinflation—where prices rise at a slower pace—but outright deflation, wherein prices decline.

That would be bad news for stocks, as companies saw an earnings boost throughout the last year of high inflation as they were able to pass on higher costs to their customers. "We think inflation is likely to surprise on the downside," Wilson said."A move to disinflation is positive for stocks, because valuations typically rise under those circumstances. However, that has already happened. Now, we expect disinflation to shift to deflation in many parts of the economy.

Nigeria Nigeria Latest News, Nigeria Nigeria Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

The $236 Billion Enigma Dominating Abu Dhabi’s Stock MarketIHC started out as a small owner of fish farms. The conglomerate now represents about 30% of the market value of Abu Dhabi’s stock exchange.
Source: WSJ - 🏆 98. / 63 Read more »

Pinterest stock advances, Masimo shares slump on outlook and other stocks on the movePinterest, Novartis and Masimo were among the stocks on the move.
Source: MarketWatch - 🏆 3. / 97 Read more »

Stock market bullishness is rising, and that's not necessarily goodOne of the underpinnings of a rising market is high levels of skepticism because it represents people who could come back into the market.
Source: CNBC - 🏆 12. / 72 Read more »