Global Economy Faces Multiple Crises... Inflation Pressure and War Shock Bring a 'Worsession'

[Asia Economy New York=Special Correspondents Seolgina Jo and Sojeong Seo] Since the beginning of this month, stocks, bonds, and oil prices have all fallen simultaneously, intensifying warning signals surrounding the global economy. Some analysts suggest that due to the recent heightened inflationary pressures, the global economy may be entering a ‘war-cession’ phase?a recession compounded by the shock of war?rather than a typical recession.

According to Bloomberg on the 11th (local time), as of the end of March, stocks, bonds, and oil prices in the U.S. financial market have all been on a downward trend. The Nasdaq index, which is tech-heavy, has dropped 6.0% just this month in the New York stock market. The Dow Jones Industrial Average, composed of blue-chip stocks, and the large-cap-focused S&P 500 index also fell by more than 1% and 2%, respectively.

In the bond market, the long-term benchmark U.S. 10-year Treasury yield recorded 2.78%, hitting its highest level since 2019, breaking the record again within days. The 10-year yield surged nearly 20% from the 2.32% range at the beginning of April to 2.78%. Bond prices, which move inversely to yields, have retreated since the Federal Reserve’s recent interest rate hikes last month.

Moreover, international oil prices, which had been soaring, have returned to mid-February levels before Russia’s invasion of Ukraine, prompting laments on Wall Street that "the global boom at the end of March is definitely over." The simultaneous decline in stocks, bonds, and oil prices is the first since October 2018. Robert Delucia, Chief Economic Advisor at Empower, said, "Their common denominator is fear of recession."

Federal Reserve officials have repeatedly hinted at the possibility of a ‘big step’ interest rate hike of 0.5 percentage points as early as May. Amid growing concerns over inflation and expectations of a more aggressive Fed tightening, geopolitical risks surrounding Ukraine and worries about global supply chain disruptions due to China’s COVID-19 lockdowns have combined to freeze the investment market.

David Roche, Investment Strategist at Independent Strategy, warned of entering a ‘war-cession,’ saying, "Central banks are in a strange situation where they must choose between inflation targets and growth." He diagnosed that as Russia’s invasion of Ukraine prolongs, the world could face an unusual situation of soaring inflation amid a recession.

As concerns grow over the global economy falling into recession, the won-dollar exchange rate is also showing instability. On the 12th, in the Seoul foreign exchange market, the won-dollar exchange rate opened at 1,235.3 won, up 2.2 won from the previous trading day.

This content was produced with the assistance of AI translation services.