In recent years, the US economy has been facing various challenges that have caused a shift in the views of economists. According to Apollo Management’s chief economist, Torsten Sløk, a soft landing is currently unlikely for the US economy. Sløk has stated that this outcome has less than a 50% chance of occurring due to the precarious balance between easing financial conditions and the lingering effects of the Fed’s interest rate hikes.
Previously, Sløk had been a proponent of a soft landing, but as new economic data continues to emerge, his opinion has changed. One factor behind this change is the improved financial conditions in the economy. Companies are issuing more high-yield and investment-grade bonds, and there is an increase in IPO activity and mergers and acquisitions. These improvements have also contributed to a stronger job market, with January’s jobs report adding 353,000 jobs to the economy. However, on the other hand, the lagged effects of the Fed’s rate hikes are slowing down consumers, firms and bank lending resulting in high interest rates which make borrowing money more expensive.
This new data leaves the economy in a fragile equilibrium between these opposing forces making it difficult for it to achieve a soft landing as predicted by Sløk