Stocks fell on Friday, capping one of Wall Street’s worst weeks of the year, as corporate executives, bankers and managers with trillions of dollars in investor money warned of more pain for the economy and markets.

The recession sent another bout of shock to investors, after a series of surprises this summer interrupted a rebound and steadily undermined optimism in financial markets.

After hitting its lowest level in June, the S&P 500 rose more than 17 percent in mid-August, before losing steam again. This week’s heavy selling has sent the benchmark stock index down about 19 percent for the year and 5.6 percent above its June low. Friday’s 0.7 per cent drop brought the index’s weekly loss close to the 5 per cent threshold it has crossed only three times this year.

Now, some of the world’s most powerful trading houses, which publish investments on behalf of pension funds, governments and other investors, are warning that there is more pain ahead.

“If you asked me a year ago, ‘What was the worst-case scenario for financial markets? “I think things are now worse than anything we can imagine,” said Nikolai Tangen, head of Norway’s sovereign wealth fund, which is the largest of its kind. The fund manages funds generated from vast oil and gas sales in Norway and $1.4 trillion is invested worldwide .

Friday’s drop came after GE’s chief financial officer, Carolina Dibek Happy, lamented ongoing supply chain stresses at Thursday’s conference, and the logistics giant. FedEx It warned of a global recession that would hurt its earnings. Together, they added to a series of corporate alarms that have shaken confidence in the outlook for the economy.

General Electric’s share price fell 3.7 percent on Friday, while FedEx broke more than 21 percent. Talk to Raj Subramaniam, CEO of FedEx CNBC On Thursday, he predicted a “global recession.”

Friday’s drop came on the heels of the S&P 500’s worst one-day drop since June 2020, a 4.3 percent drop on Tuesday, which came after the widely watched Consumer Price Index dashed hopes that inflation I started to loosen up. The report reignited fears that the Federal Reserve could push the US into recession as it looks to contain prices.

Economic anxiety was also evident in other aspects of the financial markets. Corporate debt prices fell and oil prices incurred losses for the third consecutive week.

Mr Tangen said he does not believe there is an investment zone anywhere in the world that is likely to make money in the near future. “That’s the really frustrating thing,” he said.

The central issue that worries investors is how far the Fed will need to cut it inflation cycle hits the US economy. Prices began to rise last year as a result of businesses reopening and pent-up consumer demand, and they rose further as energy prices rose after the Russian invasion of Ukraine. Tuesday’s inflation report showed that it has now taken on a diffuse nature, amplified by companies facing pressure from workers to raise wages as they struggle with the rising cost of living.

“What we’re facing is inflation expectations that are very much embedded in that,” said Seth Bernstein, president and CEO of AllianceBernstein, a fund manager with more than $600 billion in assets. He said stagnation was the only way to “break it”.

The Fed’s primary tool for controlling inflation is the benchmark interest rate, which it already raised from nearly zero in March to a range of 2.25 percent to 2.5 percent. It is expected to raise interest rates again next week.

Investors raised their expectations of how much the Fed will need to raise interest rates and how long the central bank will keep them high, predicting more pain for businesses, lower stock prices, and higher unemployment.

Prices in futures markets indicating interest rate expectations show an expected increase of three-quarters of a percentage point administered by the Federal Reserve when the central bank governors meet next week. Anything higher would represent a major move that hasn’t been made since 1984 and the financial markets could drop further.

Overall, futures are pointing to a peak in rates of 4.25 to 4.5 percent next year, a full 2 ​​percentage points above the Fed’s current policy level.

And the Federal Reserve is not alone in its drive to raise interest rates to combat inflation. On Thursday, the World Bank added to recession warnings, saying that the combined effect of central banks around the world raising interest rates simultaneously could push the global economy into deflation as soon as next year.

Expectations vary among the largest US banks. Economists at Wells Fargo and Citi expect a recession. David Solomon, CEO of Goldman Sachs, said Friday that his long-term view has not changed due to this week’s new inflation data, or the market turmoil that followed. But he noted that financial markets are “going through a lower, longer and more difficult period.”

JPMorgan and Morgan Stanley continue to predict a so-called soft landing, in which the Fed can constrain the economy at interest rates higher enough to bring down inflation without going too far and causing a recession.

Dan Evaskin, chief investment officer at bond investment firm Pimco, which manages nearly $1.8 trillion, said he was “a little more concerned” about the extent of inflationary pressures in the US economy after data was released on Tuesday.

“Investors can expect more volatility in the markets towards the end of the year,” he said. “We think 2023 will still be full of a lot of uncertainty.”