Bridgewater examines whether markets were too optimistic in pricing both resilient earnings and rapidly falling inflation. With US equities down about 10% in 2022, the authors argue that persistent wage, housing, supply chain, and commodity pressures could force the Fed into a difficult tradeoff.
Markets Continue to Discount That the Fed Will Achieve a Soft Landing; Is That Likely?
Bridgewater
Nina Lozinski, Greg Jensen
Article
1 Pages
Key Takeaways
Conflicting Market Expectations: US equities fell about 10% in 2022, yet discounted earnings remained flat to slightly higher after adjusting for rising rates.
Housing Inflation Gap: Since December 2019, rents increased around 20%, while housing CPI rose just 7%, suggesting official measures were lagging actual housing costs.
Autos Offer Relief: Flat auto prices could subtract roughly 2% from core CPI over the following year, although shortages were expected to persist into 2023.
Join our newsletter to have all of this content + Exclusive Newsletter Bonus Content delivered to your inbox every week
