May 18, 2022, 1:44 pm EDT
Soft-landing or Hard-landing?
Soft-landing or hard-landing? This is an important question to think about for the coming bear markets. A general definition of soft-landing in the financial markets means:
A soft landing, in economics, is a cyclical slowdown in economic growth that avoids recession. A soft landing is the goal of a central bank when it seeks to raise interest rates just enough to stop an economy from overheating and experiencing high inflation, without causing a severe downturn. Last week 05/12/2022 Federal Reserve Chairman Jerome Powell mentioned that his top priority is getting inflation under control. He couldn’t promise a soft-landing for the economy as the Fed raises interest rates to tamp down price increases running near their fastest pace in more than 40 years.
Indeed, the inflation is NOT transitory as Powell mentioned many times last year. What he said is totally opposite to the reality of the past two years. He could be correct this time that hand-landing is possible during the rates hike process.
The stock market also gave us hints that hard-landing is approaching at a steady pace. The breakdown of retailers today (TGT, WMT, COST. DLTR) dragged Dow Jones down about -1000 points at this moment. Nasdaq is down about -4% now. In our opinion, the crush of retailers nails down the coming recession.
More terrible parts are not limited to the negative numbers of GDP. Layoffs, high inflation, house foreclosure, financial hardship for businesses and individuals, and chaotic social environments, are going to come altogether during the recession.
Please be prepared by raising the cash level in your portfolio. Pay down debts and save as much as possible.