Across the pond, where household energy costs have soared to stratospheric levels, Bell said various levers are being pulled by politicians to avoid recession, but that’s putting the central banks in the position of having to raise interest rates to prompt economic contraction.
For example, the average home energy bill has annualized to an increase of more than 3,000 pounds over normal levels, he said, which would be incredibly hard for the citizenry to handle and would have done the trick in term of entry to recession. But Britain’s new prime minister, Liz Truss, capped the increase to 2,500 pounds in response, creating another inequity where homeowners and homeowners-to-be will feel economic pain first and more deeply, Bell said.
“Pretty much everyone in Britain has a utility bill, but a much smaller number of people have a mortgage,” he said.
Even if the impact of these economic manipulations on job numbers and inflation has yet to be seen, the world of investing is already witnessing changes, the panelists said.
“It’s too late to look for inflation hedges. That train is over and done with for a few months now. The markets believe inflation will come down either because of the Fed and a recession, or because things will improve on the supply side,” Bahuguna said. “Unless we have a clear picture that multiples are getting compressed enough or we see the data improve, it’s best to be in a neutral position.”