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US Unlikely to See a Soft Landing

ByEditor

Feb 12, 2024

According to Apollo Management’s chief economist, a soft landing is now one of the least likely outcomes for the US economy. With less than a 50% chance of it happening, Torsten Sløk points to the fragile balance between easing financial conditions and the impact of the Fed’s rate hikes as the reason for this prediction.

In a recent interview with Bloomberg, Sløk expressed his concerns over the deteriorating likelihood of a soft landing for the US economy, stating that there is now a higher than 50% chance of a hard landing or no landing at all. These sentiments mark a shift in his position, as he was previously an advocate for a soft landing.

One of the factors contributing to this dire economic forecast is the ease of financial conditions observed in the economy. “The worry is the risks have risen that we will not have a soft landing,” said Sløk. Companies have been issuing more high-yield and investment-grade bonds, and market activities like IPOs and mergers and acquisitions have seen a resurgence. These have also helped strengthen the job market, as indicated by the January jobs report.

However, these favorable economic indicators are counteracted by the lagged effects of the Fed’s interest rate hikes, which have slowed down consumers, firms, and bank lending. The high interest rates have complicated the borrowing process, particularly in markets like commercial real estate. This tension between the two opposing forces has placed the economy in a precarious, fragile balance.

By Editor

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