Deep Knowledge Investing: Mixed Economic Data – Still More Rate Hikes
Markets appear to be heading towards a “soft landing” after all. That’s better than a recession, as a soft landing means slowing economic growth without negative growth. The biggest reason for the move is likely due to the mixed economic signals right now.
For instance, the job market is holding strong, although overall growth has now stalled out. Manufacturing data continued to show a drop, a potential sign of danger ahead.
Ultimately, the mixed data now suggests that the Federal Reserve will make good on its promise to raise interest rates.
For instance, the Fed tends to look at factors such as employment. With an unemployment rate under 4 percent right now, the job market is holding strong. If the Fed cuts back now, it risks a strong jobs market driving wages higher, which could fuel inflation.
Consumer spending likewise remains strong overall. It has shifted a bit in recent quarters, however. Consumers have been spending more on travel and hospitality, and less on goods.
While the Fed has rarely achieved a soft landing in prior interest rate hike cycles, they have had a few successes, like in the mid-1990s. Such a move could be playing out today. And investors may not want to be fully fearful going into the final two rate hikes of this cycle, instead looking to 2024 for a possible recession.