- What is the current state of inflation?
- What areas of the economy are being most impacted?
- What areas of the financial markets are being most impacted?
- Where do prices head from here?
| It feels like you cannot have a conversation these days without discussing inflation – prices at the pump, the grocery store, construction costs – it is a very long list and rising prices are touching all our daily lives. Inflation is not only top of mind for individuals, but also for Central Bankers looking to keep the economy on a sustainable growth path. To be certain, the Federal Reserve (Fed) has shifted its focus from full employment (growth) to price stability (inflation). Is the Fed now willing to roll the dice on economic growth to ensure lower inflation? Have the chances of a recession increased? These questions have become increasingly appropriate, in our view. Bottom line: We believe a “soft landing” scenario for the economy is still possible. Because we think inflation may have peaked, the Fed will be able to justify a slower pace of monetary tightening later in the year. This will result in a mid-cycle economic slowdown, but not a severe recession. Should inflation remain stubbornly high, the Fed will have no choice but to hike rates until something breaks – either the economy, the stock market, or both. |
More from TWO THE POINT
- Two the Point — The Bond Market Believes a Recession is Coming
In our weekly video series, we highlight one observation we think is most important regarding the economy and the financial markets. This week we talk about the current bond market. - Two the Point — The Biggest Risk Ahead for StocksIn our weekly video series, we highlight one observation we think is most important regarding the economy and the financial markets. This week we talk about the biggest risk ahead for stocks.
- Two the Point — Officially a Bear Market…but Still Ahead of the GameIn our weekly video series, we highlight one observation we think is most important regarding the economy and the financial markets. This week we talk about an official bear market and how to stay ahead of the game.