It’s getting tougher for Wall Street to stick the landing on its dream scenario of a soft landing, and that could me a recession.
Good morning. A surprise attack from Palestinian militant group Hamas on Israel on Saturday led Israeli Prime Minister Benjamin Netanyahu to declare a state of war.
In today’s big story, we’re looking at how Wall Street’s dream of a soft landing for the economy might be dashed.
What’s on deck:
Markets: A September report card from some top hedge funds.
Tech: Personal AI devices are the newest «golden goose» in tech.
Business: Wall Street has a new dress code, and ties and heels need not apply.
But first, prepare for turbulence.
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The big story
Crash and burn
When it comes to the risk of a recession hitting the US economy, it’s like déjà vu all over again.
For what feels like the umpteenth time, the consensus on whether the US will fall into a recession has changed.
This go round, Wall Street’s dream scenario of a soft landing — taming inflation while avoiding a recession — is on life support, writes Insider’s Matthew Fox.
(If you’re looking for an exact number of flip-flops, famed economist Mohamed El-Erian pegged it as the sixth time consensus has shifted in the past 15 months.)
As Matthew details, the crux of the issue is three simple words: «higher for longer.» In the Federal Reserve’s fight against inflation, chair Jerome Powell has made clear his expectation to keep the benchmark Fed Funds rate above 5% well into 2024.
And while the S&P 500 was initially able to notch significant gains in the first half of the year, the wheels have started to come off as relief from high rates seems unlikely.
September was brutal for stocks, and the bond-market sell-off hasn’t helped. Soaring 10-Year US Treasury yields mean a risk-free investment offering nearly 5% returns, making stocks even more unappealing. And don’t look now, but bond yields could edge even higher.
«But wait! Jobs are strong, and unemployment has remained flat.»
You’re not wrong if that’s your initial reaction reading all this. Friday’s job report was indeed strong. The US added 336,000 jobs last month, nearly double what was forecast, while the unemployment rate held at 3.8%.
