In our client updates, we often spend a fair amount of time gazing at the below graphs.
Betting on a soft landing; rates up to tame inflation, then trending lower as the objective is accomplished. Normally, recessions are delivered by a central bank overtightening, demarcated by the gray vertical bars, below…
…& in each period, the unemployment shoots up, by a lot.
Note the tiny amount forecast here, which is at sharp odds with historical experience.
It is hard to conclude, on these graphs alone, that a soft landing should be the “base case”.
Equally, across human history, we do indeed tend to muddle through, in which case a soft landing (the strategist’s fancy way of referencing muddle through) seems a more reasonable expectation.
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