Moneycontrol Pro Panorama | It's not the rate pause but stagflation that's worrisome

The macroeconomic outlook for the US and the rest of the world is uncertain.

Dear Reader,

The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

Expectedly, the June meeting of the Federal Open Market Committee (FOMC) ended in a status quo -- holding rates steady at 4.25-4.5 percent. Given the uncertainty on the outcome from President Donald Trump’s tariffs and trade policies, the US Federal Reserve has chosen to sit tight on interest rates since January, when Trump took office, the last cut being at 25 basis points (bps) in December.

Call it a cautious stance, but the Fed chair Jerome Powell made no bones about calling out the risk of stagflation -- high inflation and low growth -- that’s facing the US economy. The Fed estimated core PCE inflation to be 3.1 percent in 2025 versus 2.5 percent estimated in the December meet. More disconcerting is its downward revision of GDP estimates for 2025 to 1.4 percent against 2.1 percent in December. Export-import data show volatility. Retail sales are down, led by car sales, and goods inflation is up. “It is certain that in the last six months, tariff uncertainty has led to a sharp adjustment in the near-term macro estimates,” writes MC Pro Research’s Anubhav Sahu here.

So far, the jobs market data is not alarmingly worrisome. The unemployment rate is lower than historical averages. But it has shown an uptick. A report by Nomura Research has stated that it expects the pace of job growth to slow. So far, firms are scaling back hiring. But the economic outlook turns negative if firms “increase outright firings of workers”, states the report. What’s certain is that Trump’s tariffs are bound to hurt, but it will come with a lag.

In other words, the macroeconomic outlook for the US and the rest of the world is uncertain. Exacerbating this are the escalating tensions between several nations -- Israel-Iran, Russia-Ukraine. There is indirect impact from supply chain and logistics disruptions for almost all nations.

Cut to India. Exports which saw a bump-up in the March quarter, prior to Trump’s policy announcements, are likely to moderate ahead. This, along with delays in shipments and in policy decisions by companies and countries, could impact profitability of companies and also expansion plans.

India’s domestic economy, however, seems to be better off than most other economies. Upfront monetary easing, credit availability, tax breaks, and focus on infrastructure are expected to recharge the investment environment.

“Look inward” is the mantra that analysts are using for investing in Indian equities.

That said, results of listed companies saw some headwinds in terms of sales growth slowing down in the March quarter, compared to the earlier ones. “The broader market valuation premium and fragile macro environment warrant a staggered approach to allocation,” suggests Sahu.

Investing insights from our research team

Why this mid-sized old private bank is a candidate for long-term portfolio

How is the health of this healthcare stock?

What else are we reading?

Will Nippon Steel regret the many concessions it made to acquire US Steel?

Data Story: The wide gap between SMID valuations and earnings

How far will India gain from Modi’s latest G7 outing?

IEA report: Is the oil industry in a crisis?

Chart of the Day | Will cement prices stay strong, after hitting multi-year lows in FY2025?

Why Big Tech cannot agree on artificial general intelligence (republished from the FT)

Survival Over Speculation: A smarter investing strategy

Why ‘attention’ is the most underrated skill of our time

How InMobi’s Naveen Tewari cracked the US market

Are the problems facing microfinance firms just a blip?

Markets

Listed for years, still these PSUs have not complied with public shareholding norm: Here's why

Tech and Startups

Why India should consider appointing a Chief AI Minister

Technical Picks: SBI, DLF, EICHERMOT, JUBLFOOD, RADICO

Vatsala Kamat
Moneycontrol Pro