Wall Street Optimism Kicks Recession Talk Down The Road

Improving sentiment has led to a consensus among market watchers, who now expect a soft landing for the U.S. economy although much of the macro data continues to suggest caution. Monetary policy typically lags six to 18 months from an initial hike to a slowdown in activity, and it only became restrictive in late 2022, with the rise of real interest rates.

Coming into this hiking cycle, the U.S. Federal Reserve was far behind the curve – with nearly double-digit inflation and the federal-funds rate starting at 0% – so it is understandable that recession headwinds may need more time to coalesce.