- A „zombie economy” is haunting the stock market and fueling uncertainty, Canaccord Genuity's chief market strategist told Bloomberg.
- High interest rates drive up borrowing costs and create „zombie” companies lurking around the economy.
- But America has still seen strong economic growth, creating recessions and market volatility.
The stock market has been in a frenzy lately. Blame it on the zombies.
Or rather, zombie companies, which are debt-ridden companies with unsustainable business models. One strategist says they have created a „zombie economy” that has contributed to volatility as interest rates have risen.
„We still have a zombie economy,” said Tony Dwyer, chief market strategist at Canaccord Genuity. Bloomberg said On Wednesday. „This is the fastest rate-hike cycle in a generational leveraged system in history. It's not great.”
That Higher borrowing costs Recently, cracks have been exposed in the commercial real estate industry. Shares of New York Bancorp have fallen 31% over the past 5 days. It gives investors flashbacks of bank failures in 2023.
At the same time, Dwyer explained that the economic outlook remains uncertain. Although borrowing costs haven't been this high in a decade, the U.S. economy appears to be doing well, posting strong GDP growth and red-hot jobs data.
It is that uncertainty that bleeds into the stock market.
„The problem we have in the market in this zombie-like economic environment is that you're chasing a tail,” he said.
A commercial real estate slump won't bring down the economy, said Dwyer, who sees a simple solution.
„What kills the zombie is that you kill what created it: the fastest rate hike cycle in history,” he said.
Dwyer added: „Have some kind of medicine for the economy and commercial real estate, for the government, for everything, for the election. You need lower rates.”
With the central bank leading the way, Jerome Powell A A March price cut is unlikely. Now, traders are putting a 55% chance the committee will cut rates by 25 basis points at its May meeting. CME FedWatch tool.
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