With rate cuts on the cards this week at the FOMC and the end of the easing cycle in Europe likely behind us, markets remain generally sanguine. Outperformance is beginning to exhibit itself outside of the Mag7 complex and it remains our base case that this trend is only in its infancy.
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Soft landings do not usually follow Fed tightening cycles, but you wouldn’t know that from looking at current market pricing. If anything, markets appear to be pricing another “Goldilocks” scenario. This piece takes a tour through the data to see how plausible a Goldilocks scenario is right now, or whether the markets might just be falling victim to the sin of narrative fitting, which is all too common at cyclical peaks.