US Markets' Soft Landing is Looking Brighter

US markets' soft landing is looking brighter.

After months of uncertainty about the economy's health and banking stress, Jerome Powell offered an important update regarding the Fed's economic projections.

The Fed stated that, at least for now, officials aren't incredibly worried about what recent data has revealed about the economy and the possibility of a recession.

The rest of the numbers seem alright, except for PCE:

In the Fed's opinion, PCE is still dicey. The Personal Consumption Expenditures (PCE) index is generally considered a more sensitive indicator for tracking inflation compared to the Consumer Price Index (CPI). While CPI focuses on a fixed basket of goods and services commonly consumed by urban households, providing a snapshot of price changes for specific items, PCE is a broader measure that includes all goods and services purchased by individuals and households, offering a more comprehensive view of consumer spending patterns.

The core PCE index, which strips out energy and food prices, rose 4.1% in June from the prior year. While that's more than double the Fed's 2% target, it's below economists' expectations of a 4.2% annual increase and lower than the yearly increase of 4.6% in May.

Still, it's far too soon to assume that a soft landing is in the bag. The Fed hinted last week that it could hike rates once again this year. Plus, it could take at least a year for the effect of rate hikes to make its way through the real economy from its latest decision.

The Fed said it will remain data-dependent in deciding whether to pause or raise rates in September. From its next FOMC meeting on 20 September, there are two more CPI numbers to be released on 10 August and 13 September.

In a recent article, we connected the dots to help explain the factors contributing to the current high-interest rate environment and bank runs. We also provided insights into the risks and future opportunities that lie ahead using the 'Quantamental' approach.

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