Investors increasingly expect a soft landing ahead of the Fed’s crucial decision

Investors are growing increasingly confident that the global economy can achieve a soft landing, in which inflation retreats without a large drawdown in economic activity.

In Bank of America’s August Global Fund Manager Survey, released on Tuesday, 79% of respondents said a soft landing is the most likely outcome for the global economy in the next 12 months. This marked the highest percentage of respondents projecting such an outcome since May 2023.

For now, economists largely feel the economy can maintain this path. Recent data has shown signs of cooling in the labor market. But layoffs remain low, and a rapid rise in the unemployment rate has slowed. Meanwhile, inflation continues to fall toward the Fed’s 2% target, while a fresh reading on August retail sales released Tuesday showed consumer spending is holding up.

“We still have significant consumer demand,” Bank of America Securities senior US economist Stephen Juneau told Yahoo Finance. “We’re not really seeing investment slow down sharply. So where’s that kind of hard landing coming from? We just don’t see it … in the data right now.”

 

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