The Fed’s Economic Forecast Versus The Consensus & Ours
Investors clearly fear a recession is coming—that’s what the recent stock market correction suggests. The consensus of economists probably puts the prospect of a recession at 35% (as we now do). Fed officials likely expect to avert a recession by lowering interest rates; FOMC meeting participants dropped their GDP projections last week to 1.7% this year. As for us, we see a fork in the road. One way leads to stagflation, which includes the possibility of a recession (35% odds). But our base case remains the Roaring 2020s (65%), in which a tech-led productivity boom lifts profit margins, propels GDP, suppresses inflation, and fuels wage growth and consumers’ buying power.
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