Lockdowns over a new coronavirus variant being reported from South Africa would have a "drastic" event on the markets, but anticipated interest rate hikes will also have an effect, financial analyst Seth Denson said on Newsmax Friday.
"If there are any concerns over potential lockdowns or even a slowdown in the global economy, the market's going to react in a negative way," Denson, a Newsmax contributor, said on "Wake Up America."
Stocks opened sharply lower Friday on Wall Street upon reports of a new coronavirus variant from South Africa and related air travel suspensions in the EU and elsewhere, and Denson said that's to be expected.
"The most drastic thing would be lockdowns and a new variant concern, but I think that the Dow is probably going to hit its peak," he said. "We may see some ups and some downs, but I think the Dow is going to gradually start to come back down."
Denson also said that Americans will probably spend more this holiday season, both because they feel more confident in the economy and also because of inflation, but they'll have to be more flexible with what they want to buy.
"Most analysts are expecting that as well," he said. "Americans are going to need to be a little less specific and a little more open-minded, because maybe the things that they thought they were going to able to get aren't going to be quite available."
Online shopping will continue to rise, said Denson, but this holiday's shopping will "still help a lot of these stores get into the black" after losses during the pandemic.
Meanwhile, President Joe Biden has announced that Federal Reserve Chairman Jerome Powell will stay on after his term expires in February, and Denson said that's probably the right thing to do.
"I'll say that because one thing I've liked about Jerome Powell was that he ran the Fed based on monetary policy that they thought was accurate, not based on political reasonings," said Denson. "We saw that during the Trump administration when he raised interest rates significantly right after he took the position, and I like an independent Fed."
However, Denson said he thinks Powell "played politics a little bit too much" over the past year with Biden in office, so he hopes he returns to his "original position and leads by way of what needs to be done based on monetary policy, not necessarily political headwinds."
Denson added that he thinks it is the correct move for the Fed to raise interest rates to combat the effects of inflation.
"It is the right thing to slow this inflation," he said. "No matter how transitory they may feel it is, time has proven that it's not."
Also, Americans who are living off fixed incomes based on retirement need higher interest rates so they can gain on their investments, said Denson.
But Powell needs to raise the rates gradually, "maybe a quarter-point over the next two to three quarters," said Denson.
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