Read a bunch of macroeconomic articles and there appears to be at least four schools of thought. Of course the answer is nobody knows for sure, but wondering what your thoughts are.
One school of thought is that inflation is runaway, hard to tame, and we will get into stagflation. This school of thought usually touts the “commodity supercycle” and the “energy supercycle” and other cyclical stocks. High inflation, recession.
A second school of thought is that Powell will raise rates, inflation will remain higher than usual (think hovering around 4-5% instead of the usual 2-3%). We will be able to avoid a recession though as Powell will not be as hawkish as feared or the economy is strong enough to weather his hawkishness. Usually, this view is pro the “reflation trade” of value stocks like banks and industrials, and to a lesser extent than the first school of thought, energy and materials. High inflation, no recession.
The third school of thought is that Powell will be able to tame inflation but will have to raise rates to do so and will trigger a recession. This view usually favors value and big cap tech with wide moats like Microsoft. Low inflation, recession.
The fourth school of thought is that Powell has this all figured out and can orchestrate a soft landing. This view is relatively rare right now because everyone seems so bearish but may gain traction later. This view is generally bullish on the stock market, especially favoring tech and winners from the past 10 years. Low inflation, no recession.
Thoughts?
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