In an analyst note published Friday, Bank of America chief economist Michael Hartnett predicted a “no landing” scenario in the first half of the year, where there is no immediate slowdown in growth but inflation remains above trend. That would likely force the Fed to raise interest rates much higher than previously forecast - and keep them elevated for longer.
“No landing means no Fed pausing,” Hartnett wrote, warning that central bank tightening “always breaks something.” He projected the S&P 500 could tumble nearly 7% by early March as a result.
“no immediate slowdown in growth”
Well, under that scenario, corporate earnings should stay elevated - and could support stock prices.
With a slowdown in growth, the Fed pauses and eventually cuts rates - and could support stock prices.
Its a win either way. That glass is half full.
Forced to choose, I think growth slows down.