As Apollo Management’s chief economist, Torsten Sløk, has stated, a soft landing for the US economy is currently unlikely. According to him, this outcome has less than a 50% chance of occurring due to the delicate balance between easing financial conditions and the lingering effects of the Fed’s interest rate hikes.
Previously, Sløk had been an advocate for a soft landing. However, as new economic data has emerged, his opinion has shifted. One factor that has contributed to this change is the improved financial conditions in the economy. Companies are issuing more high-yield and investment-grade bonds, and the IPO market is reviving. Mergers and acquisitions are also increasing. These improvements have led to a stronger job market, with January’s jobs report adding 353,000 jobs to the economy.
However, despite these positive developments, the lagged effects of the Fed’s rate hikes continue to slow down consumers, firms, and bank lending. This has resulted in high interest rates that make borrowing money more expensive.
With this new data leaving the economy in a fragile equilibrium between these opposing forces, it seems unlikely that we will see a soft landing as predicted by Sløk.