UN warns monetary policy could trigger recession

Yahoo Finance Live anchors discuss the UN’s warning on monetary policy.

Video Transcript

JULIE HYMAN: And we are seeing a continuation of the rally that began yesterday. All three major averages indicating a higher open here after a pretty blockbuster beginning to the fourth quarter in the trading session yesterday. However, people are still sort of bracing themselves for a volatile October, leading into the midterm. And that's as we have a lot of earnings coming our way that might not be so fantastic.

We're also keeping an eye on oil prices. They're starting to climb back above $80 per gallon. And right now, we're seeing them above 85, in fact. This following the news that OPEC+ is considering cutting oil production by more than one million barrels per day. We saw some weakness in oil prices kind of coming into this, and now a little bit of a recovery. But overall, it seems like there's sort of a lack of willingness to go up, up and away with-- sentiment wise--

BRIAN SOZZI: So it's not the new bull market.

JULIE HYMAN: --to get to--

BRIAN SOZZI: Today is not the new bull market. No, that's not the start.

JULIE HYMAN: I think that's safe to say that.

BRIAN SOZZI: OK, all right. Look--

JULIE HYMAN: Maybe. I don't-- I mean, you know, you never know.

BRIAN SOZZI: I think what you're seeing here today, of course, you've seen the pullback in yields. The market likes that, of course. You've seen a little bit of just an improved news flow out of all that stuff that was going on in the UK last week, of course, but also this view that maybe stocks, at least in the short-term for a couple of days, just got oversold. And I'm looking at the AAII sentiment survey that measures investor sentiment. And it hit-- topped over 60% for the second week in a row.

Now, Ryan Detrick over at Carson Group, a friend of our show, noting it has not hit that level since 1987. This survey has been around since 1987. So what is the read? Is that perhaps stocks maybe got too oversold last week, and we're seeing some finally some dip buying come back in here, given improving yields, given improving sentiment, at least out of the UK?

BRAD SMITH: Well, yeah, all of that tied in as well to this thought that we may have seen, or at least passed, the most aggressive stances that the Fed will have to kind of institute policy wise, even though we do know that in future meetings, they're still expected to continue to raise rates here in the US.

It's a question more broadly in the global picture where some of the other central banks continue to take action there, especially as Julie was mentioning a moment ago, you still have this move that's expected from the October 5 meeting for OPEC for them to actually cut some production. That's going to, once again, ratchet up the pressure on energy, too, especially within the eurozone.

BRIAN SOZZI: Yeah, I would say this is, just continuing what we were just talking about it, is more-- to me, it feels like a more of a technical move in markets after they've come down so quickly because on the other side of that, you still have a lot of bears out there on the Street.

I'm looking at what JP Morgan wrote, their team wrote this morning. They're looking at a potential policy risk or policy error from the Federal Reserve. I've not seen that JP Morgan team, which has been one of the most bullish firms out there on the Street, say something like that before. And they're pointing to increased or recent escalation in hawkish rhetoric for the Fed raising the risk of a Fed policy mistake that would maybe hammer stocks.

JULIE HYMAN: The United Nations is saying the same thing, which is pretty extraordinary in its economic outlook. It basically said, not just the Federal Reserve, but other central banks around the world are effectively-- I don't know that they used the word "mistake," but that was the sort of the effect, the intent, of what they were saying, that they are pushing the globe into recession. So this is really the central tension here as we head into the last part of the year.