Bridgewater, the world's largest hedge fund, is cautious about its economic outlook, with Greg Greg Jensen, its CIO, predicting a future downturn.

In an interview with the Financial Times on Wednesday, he said:

We live in a completely different world. We are approaching an economic slowdown.

He expects inflation to increase pressure on the Fed to raise interest rates unexpectedly. But he added that the Fed would still tolerate an inflation target of more than 2 per cent because policymakers could not stand a brutal stock sell-off. The latest consumer price index will show that inflation is still above 8%.

Jensen thinksIf the fed does bring inflation down to its 2 per cent target, the stock market could plunge 25 per cent from its current level because tightening must become more aggressive.He said:

This will damage the economy and could hit weaker companies.

Slowing economic expansion to control high prices will require the Fed to take a positive stance, which Jensen says will deplete liquidity in financial markets. He explained:

If you want to avoid getting involved in a liquidity crisis, you need to pull out of assets that need liquidity and hold assets that don't need liquidity.

Mohamed Erian, dean and economist of Queen's College, Cambridge University, expressed a similar view on Wednesday, warning thatAs the Fed injected too much liquidity into the market during the outbreak, the US economy will either fall into stagflation or into recession.

Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, takes a more pessimistic view of the US economy.Soaring energy costs could cause the u.s. stock market to fall by another 30%.

Mr Emanuel cut his target price for the S & P from 4800 to 4300 in 2022, but also offered a more pessimistic scenario in which the index could fall to 2900-a level last seen in 2020, when the US had just recovered from the epidemic. The index closed near 4017 on Thursday.

In an interview with Bloomberg Television on Thursday, Emanuel said:

We haven't seen the fundamental catalyst yet, and we all know that the biggest fundamental catalyst is the fall in energy prices. We waited every day, but it didn't happen.

Higher oil prices "have historically increased the possibility of recession", Emanuel wrote in a report on Wednesday, adding that the "recession bear market" has fallen by an average of about 41 per cent over the past century.

Rarely have stock market forecasts been so worrying, and the current situation is extraordinarily complex: the highest inflation in 40 years, a sharp increase in interest rates by the Federal Reserve and the conflict between Russia and Ukraine.

The s & p 500 has fallen nearly 14 per cent so far this year, and its rebound since mid-may has disappeared as warnings about the economic outlook and falling corporate profit margins have become more acute.

Miller Tabak + Co. Matt Maley, chief market strategist, said in an interview with foreign media:

People are starting to worry about whether we will see more cuts in expectations before the earnings season begins in July, a trend that could intensify once the earnings season begins. People are bound to become more cautious.

Emanuel believes that if price pressures ease, the S & P 500 is expected to reach 4800 this year. But given that the report released on Friday expects US inflation to remain above 8 per cent, the threshold is quite high. He said:

If inflation is contained and consumer spending is brought under control, this will be where we have room for upside.

At the same time, technical indicators are showing bearish signals, says Katie Stockton, founder of independent research provider Fairlead Strategies. She wrote in a report:

The palliative rebound did not improve the long-term downward momentum of the major stock indexes.