Strong job data supports soft landing scenario, but bond yields rise

U.S. stocks rose on Friday,
as expectations grew that the United States could avoid a recession,
following strong data from two consecutive economic reports.

Topic

Analysis

Forecast

Conclusion

Analysis:

The jobs report released on Friday showed an unexpected rebound. Nonfarm payrolls rose by 199,000 last month, the unemployment rate fell to 3.7%, and monthly wage growth exceeded expectations.

Separately, a separate report showed that U.S. consumer sentiment rebounded sharply in early December – beating all expectations – after households lowered their expectations for inflation next year by the largest amount in 22 years.

These strong data support the soft landing scenario, where inflation rates fall without a recession. However, they have also led to rising bond yields, suggesting that investors expect the Federal Reserve to continue raising interest rates until this scenario is achieved.

Forecast:

The Federal Reserve is likely to continue raising interest rates until mid-2024, at which point inflation should have fallen enough to justify a modest monetary easing cycle.

Conclusion:

For now, stocks remain in good shape, as strong data supports the U.S. economy and leads investors to expect a soft landing scenario. However, it is important to be aware of the risks of rising bond yields, which could lead to a decline in stocks in the future.

Strong job data supports soft landing scenario

Strong job data supports soft landing scenario

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