Key Points
A bumpy landing would be bad for stocks and good for bond prices as policy easing may start sooner..
The current baseline for manythough not alleconomists and analysts is a soft landing: Advanced economies, starting with the US, avoid a recession, but growth is below potential and inflation continues to fall toward the 2% target by 2025, while central banks may start to cut policy rates in the first or second quarter of this year..
An upside scenario is one with no landing: growth, at least in the US, remains above potential, and inflation falls less than markets and the US Federal Reserve anticipate..
Paradoxically, a no-landing scenario would be bad for stock and bond markets despite surprisingly stronger growth, because it implies that interest rates will remain somewhat higher for longer..
A bumpy landing would be bad for stocks, at least until a short-and-shallow recession looks like it has bottomed out, and good for bond prices, since it implies rate cuts sooner and faster..
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Analysis: Markets bracing for 'no landing' world economy scenario curb risk appetite
22, Feb, 23Markets, bracing for a "no landing" scenario where global economic growth is resilient and inflation stays higher for longer, are dialling back appetite for both risk assets and government debt.