Torsten Sløk, chief economist at Apollo Management, has stated that a soft landing for the US economy is currently unlikely. He believes that this outcome has less than a 50% chance of occurring due to the delicate balance between easing financial conditions and the lingering effects of the Federal Reserve’s (Fed) interest rate hikes.
Previously, Sløk was a proponent of a soft landing, but his opinion has shifted as new economic data has emerged. One of the factors behind this change is the improved financial conditions in the economy. Companies are issuing more high-yield and investment-grade bonds, and there has been a revival in initial public offerings (IPOs). Additionally, mergers and acquisitions have increased. These improvements have also contributed to a stronger job market, with January’s jobs report adding 353,000 jobs to the economy. However, on the other hand, the lagged effects of the Fed’s rate hikes are slowing down consumers, firms, and bank lending. This results in high interest rates and makes borrowing money more expensive.
This new data leaves the economy in a fragile equilibrium between these opposing forces, making it seem unlikely that there will be a soft landing as predicted by Sløk.