Another bleak target outlook, World Bank worries about stagflation, bitcoin tumbles

World Bank warns about stagflation

US stocks teetered as traders digested another profit warning from Target and a dire outlook from the World Bank. The story behind Target is not surprising to anyone as many retailers have been talking about persistent supply chain issues and as a shift in spending from goods to services. Target has an inventory problem and is leading everyone to believe that the rest of retail will have a margin problem.

Target cut their profit outlook and will struggle getting rid of unwanted inventory. Dampening the mood was the World Bank’s latest outlook that highlighted the risk of stagflation, with potentially harmful consequences for middle- and low-income economies alike.

With inflation this elevated, the Fed can’t change its reaction function. If we go a couple of months in a row of hearing corporate America talk about a weakening US consumer, that might be what is needed to make the Fed shift tightening to a lower gear.

Despite all the gloom that is out there, some investors are finding stocks attractive now as the US is not likely to enter into a recession this year or next. ​ Traders might be pricing in a recession in the first quarter of 2024, but that means we can have a string of solid earnings seasons after inflation finally peaks at the end of summer.

Bitcoin is struggling here as the crypto space gets bombarded with lawsuits and fading interest. ​ Money is shifting to exchanges and many crypto traders are still nervous about one last plunge. ​ Binance is dealing with money laundering claims and the Winklevoss Twins have lawsuits over alleged failures of protecting customer assets.

Bitcoin’s correlation with equities could be breaking and that could lead to greater volatility over the short term. ​ If Bitcoin falls below the USD 28,000 level, it could get ugly as prices might not see support until the USD 25,500 level. ​ ​

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.