The Fed's war on inflation might still not be over despite its year of rapid tightening, Bridgewater co-CIO says
But Karniol-Tambour said investors shouldn't take the Fed concluding its tightening campaign as a given – because there's a strong possibility that more tightening is required to bringThere's a scenario where"the economy doesn't slow that much, more like what is priced into markets, and then inflation is a lot stickier than we'd like and the Fed is going to have to tighten more in order to actually engineer a slowdown," she told CNBC.
Further rate hikes would likely be bad news for stocks, which have rallied in 2023 thanks to markets' expectation that the Fed will have paused its tightening campaign by the middle of the year. That's because rising rates make it more expensive for companies to borrow money, chipping away at the future cash flows that make up a part of their valuations.
"It's one of the most dangerous and bad times for risk assets that we've seen in decades," Karniol-Tambour said.
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