In Samuel Becketts’ play Waiting for Godot, the two main characters sit around all day talking and anticipating when Godot will finally appear. He never arrives. Today, practically everyone is anticipating a recession and positioning for one. Is it possible, that, like Godot, it never shows up? Sure, anything is possible. But let’s think about the consequences of that for a moment.
If we avoid a recession, will the Federal Reserve (Fed) cut rates significantly and quickly? Probably not. Will inflation get to the Fed’s 2% goal without a recession and higher unemployment? Unlikely. So, in our view, a soft landing would mean a tougher inflation fight and higher rates for longer even if the Fed pauses for a while. Not great news for stocks nor a recipe for high earnings growth.
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