Labor Market

Despite the blah opening to the year, we do not think stocks have reached an inflection point. We expect that incoming data will continue to flatter the soft-landing narrative for another couple of months, helping the S&P 500 to establish a new all-time high before the rally runs out of steam.

Following today’s US jobs data release, the Joshi rule real-time US recession indicator inched up to 0.18 and is now just a whisker from its recession event-horizon of 0.20.

A soft landing can be achieved but not maintained. We are cutting our tactical recommendation on stocks from overweight to neutral and scaling back our long-duration stance.

The market is excited by the idea that the Fed will cut rates early this year, even without a recession. But is that likely, with inflation still set to be around 2.8% mid-year?

Our outlook for the Fed’s interest rate and balance sheet policies in 2024.

Our outlook for the Fed’s interest rate and balance sheet policies in 2024.

Our last publication of 2023 is an illustrated guide to our view that the economy will enter a recession around midyear. We expect equities will underperform Treasuries and cash over much of 2024, but we are waiting to turn tactically defensive until more investors are drawn into the soft-landing camp, capping the equity rally.