A growing number of investors are anticipating a “no landing” scenario for the US economy, where inflation remains below the Fed’s 2% target, while economic growth persists.
According to Bank of America’s Global Fund Manager Survey released on Tuesday, 36% of respondents foresee a “no landing” outcome, a notable increase from the 23% recorded a month ago. This marks the highest level since June 2023.
In contrast, 54% of respondents anticipate a soft landing, where economic growth slows without entering a recession, and inflation returns to historical levels. The shift in sentiment reflects a departure from last year’s debate on Wall Street, which focused on the likelihood of a hard or soft landing.
Recent economic data supporting robust consumer spending has fueled expectations of sustained growth. Retail sales in March, particularly in essential categories, surpassed expectations, leading economists to revise upward their projections for first-quarter economic growth.
Goldman Sachs now projects a 3.1% quarter-over-quarter growth rate, up from the previous estimate of 2.5%. Similarly, the Atlanta Fed’s GDP Now tool forecasts growth at 2.8%, an increase from the prior projection of 2.4%.
Despite concerns about rising inflation, fueled by higher-than-expected consumer prices, many economists now speculate that the Federal Reserve may delay rate cuts. This sentiment aligns with a “no landing” scenario for 2024, as observed by market indicators such as surging 10-year Treasury yields and declines in interest rate-sensitive sectors.
Morgan Stanley’s chief investment officer, Mike Wilson, suggests that while this scenario poses risks to valuation, it could create a favorable environment for earnings growth, particularly in underpriced areas like large-cap Energy stocks.
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