Analyst sums up US inflation and stock prices outlook

US stocks are down in early trading on Thursday, with losses for major indices putting the market on track for a monthly dip.

All this is happening amid inflation jitters that have only increased in tempo with the latest readings. Analysts say recession fears are likely to weigh on the markets. If stocks see more pain, the highly correlated crypto sector could mirror the downside.

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Marcus Sotiriou, an analyst at the UK based digital asset broker GlobalBlock says in a statement obtained by Invezz:

In the U.S., consumer sentiment is now lower than what it was during the GFC (Global Financial Crisis) in 2008, shown by the University of Michigan Index of Consumer Sentiment. This gives further indication of growth slowing in the U.S. in the coming months, coinciding with elevated inflation.”

In his view of the stock market and short term price action, the analyst says two things drive prices – “future earnings and a multiple of what you are willing to pay for those forward earnings.”

Recession ‘not fully priced in’

Sotiriou notes that market expectations of higher interest rates have compressed these multiples, a scenario that stock prices trading lower.

The downtrend and the fact that the market may not have “fully priced in” the recession, which he says, could portend more earnings revisions. A grinding for the economy will only heighten the risk averse environment and probably increase losses across equities – cascading the rot into crypto.

The S&P 500 was down nearly 2% at 3,744 while the Dow Jones Industrial Average had shed more than 500 points, or 1.7% and Nasdaq was 2.7% lower.

Bitcoin and Ethereum were trading lower on Friday, BTC/USD below $19,000 with 5.6% in 24-hour losses and ETH/USD just above $1,000 (nearly 9% down in the past 24 hours.)