Why a ‘no landing’ scenario may take place after all
The U.S. economy may not experience a “soft landing” after all. A soft landing occurs when economic growth slows just enough to bring down inflation below the Federal Reserve’s 2% target without tipping the economy into a recession. Many on the Street expect this to be the case, as the central bank starts to lower interest rates. BNY Wealth’s Alicia Levine has a more optimistic view. She thinks the economy is experiencing a no-landing scenario as it continues to expand without slowing down. “So far, clearly bank earnings are coming in better than expected, both top line and bottom line. Net interest income is better than expected. So, that is a good signal for the economy,” the firm’s head of investment strategy and equities told CNBC’s ” Squawk Box ” on Tuesday. “The other thing that that’s showing [is] that our call for the ‘no landing’ is actually playing out.” Her remarks come after a slew of better-than-expected earnings results from banks such as Wells Fargo and JPMorgan Chase last week. Bank of America , meanwhile, reported strong results Tuesday. The goal Levine, who has a year-end S & P 500 target of 5,900, pointed out the pace of real gross domestic product growth for the third quarter is looking “very close” to 3%. That would mark two consecutive quarters of 3% real GDP growth, as the second quarter saw the economy grow at an annualized pace of 2.8% . “That’s no landing,” she continued. “And that’s the goal, right? The goal was always to get it above 2%.” It’s not just bank earnings that point to solid economic growth. Overall U.S. corporate profits are at record highs and about 60% higher than their level right before the Covid-19 pandemic, per data from MRB Partners. The firm likewise expects economic expansion to continue. “Strong U.S. corporate sector finances point to healthy ongoing hiring and capital spending levels,” Peter Perkins, the firm’s partner of global strategy, wrote in a Tuesday note. “The corporate sector will remain a bulwark for the overall U.S. economy.” The economy and stock market could see some headwinds, especially if inflation persists and the Fed can’t cut rates as much as investors anticipate.
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