Soft Landings are a Rare Species

Michael LebowitzAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Market narratives have been around for ages. But the internet and, more recently, social media allow narratives to spread much quicker. Accordingly, they have become more frequent and potent market forces. Following economic data, corporate earnings, politics, global affairs, and many other factors are still crucial for investors. But equally important, especially over short periods, is identifying which narrative(s) most heavily impact markets.

Today's popular narrative is a growing consensus for the Fed to engineer a soft landing and a “Goldilocks” economy. The Fed and Jerome Powell, purposely or not, started the narrative.

As the fiscal stimulus that drove above-average economic growth in the post-pandemic era exits the system and monetary policy remains very tight, economists and investors wonder what comes next. The scenario rapidly gaining in popularity is the Goldilocks narrative.

In case you forgot, Goldilocks and The Three Bears starts with papa, mama, and baby bear leaving their house for a walk while their porridge cools. Goldilocks enters their home and tastes the three bowls. Papa's is too hot, and mama's is too cold. Baby bear's is just right. She finds baby's chair and bed are just right, not too hard or soft. Goldilocks prefers things "just right."