Who’s Right – Cautious Economists Or Optimistic Investors?

A solid first-half rally sets up 2023’s second half as a tug of war between still optimistic market expectations for a soft landing and cautious economic forecasts calling for recession. The robust U.S. equities rally shines in contrast to muted gains across most other economically sensitive financial markets, including oil, copper and high-yield bonds.

We continue to believe a recession is the most likely outcome, given the many unfavorable leading economic indicators and the speed with which economic momentum can deteriorate.