The Outlook



Kathryn Rooney Vera

Chief Market Strategist


Odds: Highly Likely | Timeframe: 3-6 months

The costs of services are driving US inflation and that’s not going to change anytime soon. Plus, you’ve got a strong labor market keeping wages up and the economy hot. People with jobs are going to keep spending money – regardless of what consumer sentiment polls say. So, the Fed will have to go to 5.5% in November to keep trying to cool things down (the terminal rate that I’ve predicted all along) – and keep it there for a while. The effects of higher rates will finally begin to dovetail (with a vengeance, I will say) in the next 3-6 months with the exit of fiscal stimulus (e.g. the end of student loan forgiveness, etc.) and a drain of liquidity as corporations rein in spending and consumers cope with the rising costs of services, shelter, energy and carrying their debt. None of this is consistent with a “soft landing” or “no landing” scenario. Either one would not only be historically improbable, but frankly, illogical based on the fundamental principles of economics – and those haven’t changed.



Arlan Suderman

Chief Commodities


Odds: Somewhat Likely | Timeframe: 6-9 months

Wage inflation, shelter costs and commodity prices are going to remain too high for the Fed to ease up or pivot on tightening in the short term. So a slowdown – in terms of timing and severity – will come down to how long the remaining stimulus injected into the system by government spending will forestall the pain that should result from higher interest rates. Stimulus is a primary reason why we haven’t already experienced a contraction. But the amount of it will start to ebb over the next three months as student loan repayments are reinstituted and other spending passed by Congress over the past year or so (e.g., the Inflation Reduction Act) winds down. The UAW strike also threatens to put a drag on economic growth – especially if it expands (which I think it will.) Finally, we’re seeing oil creep back up toward $100/barrel and that would also sap growth. Meanwhile, I think interest rates are finally high enough to inflict pain, and the national debt is starting to squeeze the credit market. All of this may slow things down enough to bring about a mild contraction for about two quarters – 6-9 months out.



Rhona O'Connell

Head of Market Analysis,
EMEA & Asia


Odds: More Likely Than Not | Timeframe: 6 months

I think the criticism of the Fed that we’ve heard most frequently – “too much, too late” – will prove true, with the sudden escalation of the cost of debt service as a primary reason. It was striking when US Treasury Secretary Janet Yellen noted recently that the US debt to GDP ratio is at 126%. That might have been OK when the Fed funds rate was knocking around zero. But at 5.5% (where rates are likely headed in November), that starts to weigh on things. Now you’re talking about ~3% of GDP to service that debt – and that’s significant. Combine that with other headwinds and you may see a vicious circle develop in which confidence erodes and investment slows. This phenomenon may be particularly acute among small to medium size businesses, which account for approximately 45 percent of US GDP. They don’t have the same wherewithal to weather uncertainty as do their larger corporate counterparts.



Vincent Deluard

Director – Global
Macro Strategy  


Odds: Less Than Even | Timeframe: 9-12 months

There’s an old saying that when a wise man points to the moon, the fool looks at his finger. I think there’s a lot of that going on among analysts who keep focusing on a few recession indicators – however reliable historically – instead of the overall health of the economy. I’ve been bullish on the US economy for a long time, and I don’t believe that all the latent stimulus remaining in it will simply disappear any time soon. Yes, some shocks are on the way to slow things down: the resumption of student loan payments, rising gasoline prices, the increase in income taxes in California. But we are at 5% growth right now, so we could slow down by 4% and still not contract. Is it possible we dip below that and experience negative GDP growth for a quarter – perhaps in late summer of 2024? I’d say it’s 50-50 on that – and we wouldn’t really feel it, anyway.  But something more significant, that meets all these analysts’ criteria for number of quarters of contraction or according to eight different indicators? I’d say that’s less likely.


Originally published as part of The Outlook Newsletter

Vol. 1, Issue 5C

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