Framing of economic narratives matter. Discussion will them focus on tilts around the core story. In the case of macroeconomics, the focus has been the "soft landing - transitory inflation" story. This narrative is what the Fed wants and what it is trying to manage.
In the summer and early fall of last year, the story tilted to a "hard landing and slower decline in inflation". Now with inflation slowing, the focus is back towards a transitory inflation story. With labor markets still showing strength, the hard landing or any landing is being pushed further into the future. There is even talk of no landing. The "landing-transitory" combination impacts investment decisions and how we frame what the Fed will be doing. Transitory inflation suggests that the Fed will be able to peak sooner which will feedback on the possible landing choice.
The switch to soft landing and transitory inflation has been the driver for an equity rally. A bump in inflation or data which suggests the economy is slowing will take us back to the harder landing - sticky inflation story.
Is this the right way to frame the macro environment? It is a nice shorthand story, but a simple approach may not allow us to prepare for the changes ahead. It is more likely we will get a slowdown in the inflation decline and a softness in the labor market that will drive bear market thinking.
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