There are very few forecasts for a strong economic rebound at this point in the cycle. The spectrum of debate on the global economy ranges from a sharp v recession, a soft landing, or sideways until the Fed’s work is complete.  Recent global events introduce a wild card for all asset classes, reflected in the market’s recent volatility.  Back to the interest rate cycle, the Fed’s track record in managing a soft landing is not strong, and the most bearish view seizes upon this historical track record as an anchor to their views.

Central banks are now facing the toughest of choices since the Financial Crisis: Continue the war on inflation, or ease up on rate hikes due in part to recent global events as well as the surge in Treasury rates.  Historically the Fed has underestimated both the strength of the economic outlook, as well as inflationary pressures.

Central bank policy will have to be more nuanced: (1) Continue to fight inflation as long as its above the 2% target, while (2) acknowledging that recent world events have led to a more fragile economic framework.  Corporate earnings will also come under increased earnings pressure and borrowing costs remain at elevated levels

Unlike many of the previous economic recessions, corporate and bank credit profiles remain relatively strong(despite recent regulatory initiatives which will strain bank balance sheets to some degree), supporting the thesis that an upcoming recession will be relatively mild.