The Fed: A Hard Landing Cometh

"No landing" + sticky inflation is a richly priced stock market's worst nightmare. Look for the S&P 500 to start pricing in a 4Q23-1Q24 "hard landing" scenario in the coming months.

Discussion

Over the course of January The WOTE outlined the case for a US recession starting sometime in 4Q22, but subsequent data has clearly killed that thesis with the January nonfarm payroll report coming in much hotter than expected, and perhaps more importantly, the ISM Services PMI jumping back into expansion territory. In the January 24 “Back to Basics” post The WOTE said: