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‘Nowhere near the bottom,’ top economist says as global markets crater


New York Stock Exchange

Brendan Mcdermid | Reuters

According to one economist, the stock markets will see more selling as central banks across the globe increase interest rates in an effort to curb spiraling inflation.

Brunello Rosa, who is the CEO and head of research at Rosa & Roubini, a consultancy he co-founded alongside well-known market bear Nouriel Roubini, believes there is much more monetary tightening to come from central banks, and more bad news on economic activity.

He said that “now it is time to reappreciate the economic fundamentals across the globe in terms of growth.”Street Signs Europe” Friday.

It’s difficult for the markets to remain optimistic in a world where inflation, growth and interest rates all rise quickly.

The Dow Jones Industrial AverageThe plunged over 1,000 points Thursday. Nasdaq CompositeThe Dow Jones Industrial Average fell by almost 5% on Wednesday, ending a rally. The initial relief at the U.S. Federal Reserve’s decision to not increase rates more aggressively gave way to concerns that an abrupt hike cycle to curb red-hot inflation might harm economic growth.  

Rosa stated that investors welcomed the announcement that the 75-basis point hike was off the table. However, he cautioned that there will be many 50-basis points hikes in the coming months. After policymakers from London warned of recession risk, Rosa said the Bank of England was the only central bank that is currently realistic.

“It’s obvious that all of them are incompatible [central banks]At this point, they are being tough. However, the truth is that economic contraction can be caused by a lot of tightening,” he stated.

He later said, “In both the Euro zone and the U.S. they’re not even close to realizing that there will actually be some contraction in economic activity.”

Rosa indicated that he anticipates that the war in Ukraine will continue for a longer time than market participants think. That adds to other headwinds, such as rising interest rates and soaring inflation.

— CNBC’s Elliot Smith contributed to this article.