![]() ![]() "Goldilocks economy" reemerges because of mild economic growth and disinflation, which influences monetary policy easing. After the recent downturn of 2022, a period of ![]() After all, inflation is rapidly decreasing. Now, the Federal Reserve and other global Central Banks are able to change their monetary policy stance from restrictive to neutral or even accommodative. The labor market remains on the tighter side because of supply constraints. ![]() The core of the economy is weakening, but the reopening of China helps to spur economic growth to neutral (no growth) or mildly positive territory. However, the bullish picture is the following: inflation is going to decrease significantly because of energy price deflation and goods deflation. There's likely going to be a prolonged period of time where the Fed Funds Rate remains elevated and, therefore, consistently restrictive along with Quantitative Tightening, which puts more pressure on the financial markets.įed Funds & SP500 Trend (linear) (Author, using Excel) The Federal Reserve is not hiking rates to 5.0% just to cut them immediately. I believe that's going to change in the course of 2023 as the economic reality sets in and companies record lower-than-expected profits. Instantly, the market tries to front-run the pivot again and again.īad news is still counted as good news, as of now. Meaning, if inflation falls due to weak economic growth, then the Federal Reserve will pivot, and the stock market will rise. The market is now pricing in a higher probability of a change in the Federal Reserve reaction function. Inflation has peaked for now, and disinflationary/deflationary pressures will reduce the significance of inflation data during 2023. The labor market remains structurally strong on the supply side, while economic data starts to weaken further. Still (mostly) wishful thinking, in my opinion. The markets are progressively pricing in an increased chance of a soft landing - a term proposed by the Federal Reserve in 2022 in which the economy weakens just the right amount so that inflation is subdued, but the impact on the labor market remains constrained. The current Bear-Market-Rally is bound to continue with the release of the CPI data this week (January 12, 2023, at 08:30 EST), contrary to my belief in the last article. Capuski/E+ via Getty Images And suddenly everything is fine ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |