The possibility of a soft landing for the US economy is looking increasingly unlikely, according to Torsten Sløk, chief economist at Apollo Management. Sløk has stated that there is less than a 50% chance of achieving such an outcome due to the delicate balance between easing financial conditions and the lingering effects of the Fed’s interest rate hikes.
Previously, Sløk had been optimistic about a soft landing, but recent economic data has led him to change his mind. One factor behind this shift is the improved financial conditions in the economy. Companies are issuing more high-yield and investment-grade bonds, the IPO market is reviving, and mergers and acquisitions are increasing. These improvements have also contributed to a stronger job market, with January’s jobs report adding 353,000 jobs to the economy.
However, despite these positive developments, the lagged effects of the Fed’s rate hikes are slowing down consumers, firms, and bank lending. This has resulted in high interest rates and made borrowing money more expensive. As a result, the economy is now in a fragile equilibrium between these opposing forces, making it difficult for a soft landing to occur.