Blain’s Morning Porridge: Central Banks, Recession landing Risks, and why China is the Issue to Watch Now

While inflation has started to tick higher, some investors are calling for a “no landing” scenario for the markets. That’s simply Wall Street speak for saying the economy won’t land into a recession, whether soft or hard.

However, recession risks continue to rise, as seen with inflation’s stubborn rise. And geopolitical factors could also tip the world into a recession. That means that some landing remains likely.

The Federal Reserve remains the biggest weight for investors right now. The central bank has slowed the rate of its interest rate hikes. But it still remains committed to increasing rates further.

That’s a clear sign that the Fed won’t make its proverbial “pivot” anytime soon. And that investors should remain cautious.

But there are other factors at play. Investors have been bullish on the global economy as Chinas has ended its harsh Covid lockdown policy. However, that hasn’t yet translated into any sign of increased economic growth.

China’s massive population, now free to move about, should be showing up in global oil demand statistics. It’s not. If China, one of the largest engines of global economic growth, remains anemic, so will the global economy.

It’s clear that investors should continue to expect conditions to weaken overall. That still can mean some profits going long in some parts of the market. But chances are we’re nowhere near the flip to a bullish market anytime soon.

To read the full analysis, click here.