Recessions, bank failures, and stagnant stock returns - experts see a new, difficult era dawning for markets
, sparking fears that a new financial crisis could soon unfold.
Observers have blamed the banking panic on the Federal Reserve's aggressive rate hikes over the past year, which have dramatically raised the cost of borrowing, drained the market of liquidity, and put an end to the era of easy money.SVB's collapse is a sign that bubble has burst,Now, they're warning of a handful of obstacles in the new era that investors are going to be forced to navigate. experts say. That's because banking woes naturally slow the economy.
Central bankers have already raised interest rates over 1,700% over the last year to quell high prices. Despite the volatility in bank stocks, Fed officials raised interest rates another 25 basis-points this week, bringing the effective Fed funds rate to 4.75-5%. That's the highest interest rates have been since 2007, and the impact of SVB's collapse is likely equivalent to another 50-75 basis points in rate hikes, Moody's chief economist Mark Zandi estimated, meaning real interest rates are even more restrictive.
"That's a pretty significant increase in interest rates, and I do think that puts the economy in jeopardy," Zandi warned in a recent interview with
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