The S&P/ASX200 finished lower today, dropping 44.20 points or 0.61% to 7,152.40.
The bottom-performing stocks in this index were Core Lithium Ltd and The Star Entertainment Group Ltd, down 5.41% and 5.36% respectively.
Over the last five days, the index is virtually unchanged but gained 1.62% over the last year to date.
Sectors were mixed at close of play, with Consumer Staples and Consumer Discretionary up a fraction, 0.27% and 0.32% respectively, and Industrials trailing at 0.15%, but all other sectors losing ground – Energy was the worst off, down 1.85%.
Recession still looms
deVere CEO Nigel Green had concerns about the role of central bank policy in stifling growth, which he considered to be the real danger on the horizon.
“Crushing already slowing global economic growth through the blunt instrument of monetary policy will be significantly more detrimental to an economy than short-term stagnation,” he said.
“While neither extreme is ideal, hindering longer-term economic growth is the real danger, not short-term stagflation, and it should be the focus for policymakers.”
Green pointed to the warning signs of a possible looming recession in the US in the form of the inverted Treasury yield curve.
The inversion of the yield curve in the US traditionally points to a recession, being a sign of the twin perils of a tight credit market and weak economic growth.
An inverted yield curve has preceded most US recessions since 1950. Needless to say, a US recession would have serious consequences globally.
“Stifling growth through the cost of capital becoming prohibitive for businesses and individuals leads to a decline in capital formation, reduced entrepreneurial activity and a slowdown in economic development,” Green added.
“It leads to a slowdown of innovation and development and a reduction of overall investment. These effects hinder future growth potential and undermine an economy’s competitiveness on the global stage.
“Killing off growth will naturally create job losses and a stagnant labour market. A lack of job opportunities can have a cascading effect, leading to increased unemployment rates, reduced consumer spending, and a decline in overall economic well-being.
“Economic growth typically brings increased prosperity for all segments of society. When growth is crushed, income inequality tends to worsen, which could trigger social unrest and decreased social cohesion.
“Also a growing economy generates more tax revenue for governments, allowing them to fund essential services like healthcare, education, and infrastructure development.
“Stagnation may lead to a budget crunch, but stifling growth can be even more detrimental, potentially requiring austerity measures that hurt households and public services.”
“If additional interest rate hikes further hinder economic growth, the longer-term consequences will be far worse than a bout of stagflation.”
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