Recession, inflation fears creating 'complicated' market for investors to navigate: Citi exec

Market volatility expected to continue, Tyler Dickson warns

Co-Head of Citi's Banking, Capital Markets and Advisory division Tyler Dickson stressed that U.S. investors are dealing with a "complicated market to navigate" as stocks have experienced weeks of turbulence. 

"We have to deal with three Rs on the risk side," Dickson told "Mornings with Maria" on Wednesday, noting that the U.S. is dealing with the risk of rates, Russia and recession "that are weighing heavy on the markets." 

"And you’re seeing that reflected in the way the markets are performing," he continued. "We’ve seen equity values compress and multiples have come down." 

Dickson then noted that "we’ve seen volatility in the market go up and we expect that to continue."

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He provided the insight from the World Economic Forum in Switzerland on Wednesday mornings as U.S. equity futures traded mixed following a day in which stocks struggled on weak U.S. housing sales and a profit warning by a prominent social media brand.

Ticker Security Last Change Change %
I:DJI DOW JONES AVERAGES 30946.99 -491.27 -1.56%
SP500 S&P 500 3821.55 -78.56 -2.01%
I:COMP NASDAQ COMPOSITE INDEX 11181.540156 -343.01 -2.98%

"Certainly higher rates are creating complexities across various asset classes and from our perspective we do see pressure on housing just like we see pressure on energy and food," Dickson told host Maria Bartiromo

On Wednesday morning, stocks initially traded lower and then rebounded. The tech-heavy NASDAQ Composite was down nearly 30% year to date on fresh worries about a slowing economy.

Ticker Security Last Change Change %
SNAP SNAP INC. 13.71 -0.83 -5.71%
FB n.a. n.a. n.a. n.a.
GOOGL ALPHABET INC. 2,240.15 -76.52 -3.30%

The Dow Jones Industrial Average gained 0.2% to 31,928.62 on Tuesday and the Nasdaq composite, dominated by tech stocks, fell 2.3% to 11,264.45 after a social media selloff. Snap plummeted 43.1%, its biggest single-day drop ever. Facebook parent Meta slumped 7.6%. Google’s parent fell 5.1%.

Retailers and companies that rely on direct consumer spending declined. Amazon slid 3.2% and Target fell 2.6%.

Ticker Security Last Change Change %
AMZN AMAZON.COM INC. 107.40 -5.82 -5.14%
TGT TARGET CORP. 144.50 -5.19 -3.47%

"We’re in an inflationary environment," Dickson stressed. "We have energy prices high. We have labor prices high. We certainly are seeing challenges with the supply chain." 

He then noted that he believes inflation "is expected to continue" and that the situation is a "challenge for the Fed."

Stocks have had some rough weeks in anticipation of and following the half-point interest rate hike by the Federal Reserve. It was the second of several anticipated increases this year as the central bank seeks to combat soaring inflation, which is at a high not seen in four decades.

The expectation now is that the Fed will take aggressive action to try and curb inflation, which remains near 40-year highs, according to the data for April released earlier this month, which has reduced investor appetite to hold assets perceived as higher risk.

Wednesday afternoon, the Federal Reserve is due to give insight into its decision-making by releasing minutes of its latest policy meeting.

"I think we’ve got a challenged environment and I think corporations are going to have to navigate that with care," Dickson said.

Tyler Dickson, co-head of Citi's Banking, Capital Markets and Advisory division, warns fears over rising rates, inflation and recession are contributing to market volatility.

Tyler Dickson, co-head of Citi's Banking, Capital Markets and Advisory division, warns fears over rising rates, inflation and recession are contributing to market volatility.  (iStock / iStock)

"Hopefully the Fed can help us create a soft landing where there clearly will be pressures on the corporate side of the equation, but we do see the U.S. consumer being quite strong in this environment and that will be a buffer."

Earlier this month it was revealed that inflation cooled on an annual basis for the first time in months in April, but rose more than expected as supply chain constraints, the Russian war in Ukraine and strong consumer demand continued to keep consumer prices elevated. 

The Labor Department said earlier this month that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 8.3% in April from a year ago, below the 8.5% year-over-year surge recorded in March. Prices jumped 0.3% in the one-month period from March.

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Those figures were both higher than the 8.1% headline figure and 0.2% monthly gain forecast by Refinitiv economists.

"From our perspective, the second half of the year, if we see some stability in the secondary market and some confidence in the economy and corporate earnings, we think the equity markets will open up and we’ll see some primary activity in various parts of the world, but particularly the U.S. market where I think we’ve got a great backlog," Dickson noted.  

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FOX Business’ Megan Henney, Ken Martin and The Associated Press contributed to this report.