Manulife Investment Management Global Chief Economist and Strategist Frances Donald says a soft landing would be more problematic for investors than a short recession.
It doesn’t seem like a Fed that would cut rates without a recession with the price level shock we’ve seen in the past couple of years,” she told CNBC on Friday.
In contrast to last week’s blowout jobs report of 336,000 new positions, American consumers continue to spend at a steady decline.
Donald, for her part, sees a recession coming. Some experts predict a recession is inevitable, while others say the US might be able to avoid it.
The bigger point is that there is a consensus that the economy will have difficulty reaccelerating, she said.
When rates move this high, credit contracts at the speed and magnitude that it is right now, we really have trouble throwing out all the standard economic relationships. “Consumers don’t have excess savings, defaults and delinquencies are high, and the housing market is effectively frozen,” Donald said. “We can’t get growth above 0%.”
Nevertheless, she said, the alternative is worse. In a soft-landing scenario, the economy doesn’t weaken enough for the Fed to pivot. A short recession would be the only thing that would prompt the Fed to reduce rates.
I don’t think a recession is necessarily the most bearish outcome. I think a soft landing, stagflation-type environment in which you can’t grow and the Fed doesn’t cut rates is worse for most investors.
Also Read:
- Top 3 Healthcare Stocks to Buy Now and Hold for Next 12 months
- Top 3 Ethanol Stocks with Healthy and Stable Growth Prospects
- 3 Best Specialty Chemical Stocks for Investors to Buy Now
- 4 Best Debt Free Stocks to Buy Under INR100 In India
- Top 3 bitcoin and blockchain stocks with healthy growth potential