In today’s briefing:
- Can the Fed Engineer a Soft Landing?
- 4 Reasons to Be Bullish, 4 to Be Bearish
Can the Fed Engineer a Soft Landing?
- The current rate of expected Fed tightening will push the 2s10s yield curve to invert in late 2022 or early 2023, which would be a recession signal.
- Our base-case scenario calls for a soft landing, which we assign a 60% probability, though the risk of a policy error and over-tightening is high.
- As long as the Fed adopts a hawkish tone, growth expectations will be under pressure, which should be favourable to high-quality growth and unfavourable to value for their cyclical exposure.
4 Reasons to Be Bullish, 4 to Be Bearish
- The current rally is a bear market rally. Expect further choppiness and volatility for the next few months with little upward progress in the major equity averages.
- Investment-Oriented accounts are advised to maintain a neutral position in line with the asset allocation targets specified by investment policy.
- Traders could try to capitalize on further potential gains, but purely from a tactical perspective.
Before it’s here, it’s on Smartkarma
