Just a year ago, most investment banks and Wall Street investors predicted that the US economy would enter a recession due to sustained inflation and high interest rates. But as the US economy has proven their resilience over the past year, most of Wall Street's top executives have now abandoned their predictions of an economic recession.
According to Deutsche Bank's March Global Market Survey, 45% of Wall Street investors now believe that the US economy is heading towards a "no landing" situation, with inflation still slightly above the Federal Reserve's target of 2%, but economic growth remains strong.
Has the US economy moved away from the risk of recession?
According to a survey conducted by American media in March last year, about 65% of economists believed that the US economy would enter a severe recession within 12 months.
Now, in a March survey by Deutsche Bank, only 17% of people predicted that the US economy would enter a recession or "hard landing" - a significant change from a year ago.
At the same time, even though it is expected that the US economy will fall into a "soft landing" - that is, inflation will cool down, but economic growth will also fall into weakness - the number of people is significantly reduced. In Deutsche Bank's survey, only about 38% of respondents still expect a "soft landing".
In addition, only 13% of respondents expect a recession in the United States this year, compared to 59% three months ago.
Survey question: When do you think the United States will enter an economic recession?
However, there are indications that 2024 is indeed a year of economic uncertainty. For many experts, it is now difficult to predict the future prospects of the US economy.
About 19% of respondents said they "don't know" when the next US recession will occur, compared to only 3% a year ago.
The Federal Reserve downplays investor concerns
From three months ago to now, concerns among American investors about the economic outlook have clearly decreased significantly, and the turning point lies in the economic data of the first two months of this year and the attitude of the Federal Reserve.
In January and February of this year, the US Consumer Price Index (CPI) data exceeded market expectations, which has raised concerns among investors that sustained inflation will be difficult to cool down and that the Federal Reserve's monetary policy stance will become more aggressive.
However, after last week's March interest rate resolution meeting, Federal Reserve Chairman Powell downplayed market concerns and emphasized that the slowdown in inflation data "has not changed the overall situation, that is, inflation is gradually decreasing on the road to 2%, although sometimes bumpy"
Jim Reid, head of global economic and thematic research at Deutsche Bank, said that many investors expect the US economy to enter a new outlook of "no landing" after the Federal Reserve Chairman's speech.
"Therefore, you can say that it is now an implicit blonde girl style 'no landing' scenario - the economy is currently heating up, but the central bank is not opposed to this situation, and the market is also very fond of this warm situation," he wrote in a customer report on Monday.
Has the United States entered a short-term period of "blonde girls"?
As for whether investors are overly optimistic about the market outlook of "no landing", Reed believes that only& Quota; Time can prove& Quota;. But he outlined the reasons why he believes many people are bullish about the US stock market.
Basically, investors expect the US inflation rate to be slightly higher than the target, which is usually detrimental to the stock market as it means interest rates will rise, or at least the rate cut will be lower than previously expected. But this time, due to the Federal Reserve ignoring recent inflation reports and economic growth showing resilience, Reed believes that "we may enter the blonde zone in the short term.".
He pointed out that after Powell's speech last week, the US stock market had its best week since 2024, as the Federal Reserve seemed "very confident in its ability to cut interest rates in June, even though inflation levels have recently risen."
Another reason why the market has performed so well as investors have raised their inflation expectations may be that investors believe the Federal Reserve is willing to ignore small increases in consumer prices in the future. Reed pointed out that 47% of respondents believe that "central banks should tolerate long-term inflation overshoot.".
At present, investors seem to be more concerned about inflation rather than economic recession. Moreover, even if inflation in the United States does make a comeback, investors don't seem too worried that the Federal Reserve will take action to disrupt this feast.