The statistical forecasting models say:
March thru August 2023:  +3.7 (Slightly below average)
Next 3 Months:  0%  (Flat.)
Probability of at least breaking even: 85% (Range from 55% to 85% . Meh. )

Hard landing? Soft landing? How about a delayed landing? The Federal Reserve mandate is to assure a stable monetary system and simultaneously to promote high employment. So far, so good. Unemployment remains down near a record low and inflation continues to fall slowly. The general expectation is the Fed will notch a couple more 1/4 percent interest rate increases, will pause, and see what happens, eventually starting to lower rates back down somewhat. Most market pundits fret whether the economic slowing will be mild (soft landing) or painful (hard landing).

The data I watch and my market models seem to be saying that this is going to be a drawn-out process — the economic landing is going to be delayed. This also should postpone a major market fall (unless World War 3.1 occurs, congressional Republicans really want to default on Federal debt, or another Black Swan pops up)

In 2022 with a series of 3/4 percent increases in the Federal Funds rate, the Fed sent an unmistakable message that it was acting to reduce troubling 9% inflation. Now, with inflation at roughly 5%, the message is equally clear that a slower pace of rate increases has begun. Simultaneously, the Fed has stalled increases in the money supply. But, this tightening remains very conservative.

Federal Government spending, however, is the other major factor affecting inflation and economic expansion. And federal spending will remain highly stimulative until at least the end of the current fiscal year, September 30. During the pandemic the federal annual deficit ran as high as 15% of GDP — no surprise inflation developed. Now it is down to about 5% of GDP, much less, but still strongly stimulative, and not coincidently about the same as the inflation rate.

With the presidential election round just starting, my bet is that neither party wants to be blamed for bringing on a recession. Both will posture that they want to do the right thing (whatever that is). But, both will hold tight to the populist creed of high spending and lower taxes.

Will the Fed be forced to tighten up to an extreme level? Or, will it hold off some until the election silly season passes? Don’t know, but this is a question for next fall or beyond.