Why Lloyd Blankefein’s Prediction of ‘No Landing’ Would Be Bad

The Weekly Recap

Hope you all had a great 4th of July and still have all of your phalanges. The Fed hinted that more rate hikes are down the road, albeit at a slower pace, the US labor market double expected hirings in June jobs report, Apple became the first public company to hit a $3 trillion valuation. Mark Zuckerberg launched another social media platform Threads, flying cars will be a thing soon, Taylor Swift’s Eras Tour is set to earn $1 billion and the White House earned its name when cocaine was found in the building (do we know where Hunter was?).

Why Lloyd Blankefein’s Prediction of ‘No Landing’ Would Be Bad

The former Goldman Sachs CEO created quiet a stir when he tweeted “After recent Goldilocks economic reports, maybe we don’t get either a hard landing or soft landing. Maybe we get NO landing”. No Landing suggest a scenario where the Fed struggles to achieve its desired outcome of maintaining a stable inflation rate with the target goal currently held at 2%.

Although Blankfein has been on record that he personally believes that we will experience a soft landing, meaning the economy moves from high inflation to a more sustainable level of inflation without experiencing a severe economic downturn, the thought of no landing scared some folks about the potential consequences of prolonged inflationary pressures.

This is what a hypothetical no landing scenario would look like for the economy:

Persistent Inflation: Unable to effectively manage inflation would lead to sustained periods of higher inflationary pressures which would erode purchase power and create reduced consumer and business confidence.

Economic Uncertainty: High inflation without a clear trajectory would lead business to be hesitant to make long-term investments and reduce consumer spending.

Policy Challenges: Future policy responses utilizing traditional tools like interest rate adjustments would have limited effect requiring the exploration of alternative measures.

Market Volatility: A lack of clarity and uncertainty will lead to increased volatility in financial markets where investment strategies would be adjusted leading to fluctuations in stock prices, bond yields and other market indicators.

Central Bank Dilemma: The Fed is then put in a position of trying to balance inflationary pressures with economic growth which can then lead to stagflation.

Fingers crossed for that soft landing.

Market Performance

Here are how some other indexes and asset classes have performed as of this mornings opening bell.

NYC Market Update

Here is a view of new inventory that has come onto the NYC market over the past week as well as newly signed contracts in Manhattan with expected decreases leading into a holiday week.

Mortgage Rate Update

Mortgage rates continued their upward trajectory again this week, rising to the highest rate this year so far. This upward trend is being driven by a resilient economy, persistent inflation and a more hawkish tone from the Federal Reserve. these high rates combined with low inventory continue to price some homebuyers out of the market.

News You Can Use

• Fed Sees More Rate Hikes Ahead, But At a Slower Pace, Meeting Minutes Show CNBC

• Private Sector Companies Added 497k More Jobs in June, Double Expectations CNBC

• A Mid-Year Assessment for the US Economy Axios

• Key Fed Inflation measure Shows Prices Rose Just .3% in May CNBC

• The Richcession Keeps Rolling Wall Street Journal

• The Stock Market’s Surprising First-Half Strength Axios

• Britain is Now The Only Major Economy Where Inflation Is Still Rising CNBC

• US Layoffs Fall to Seven Month Low in June Reuters 

• US New-Vehicle Sales Rise an Estimated 13% in First Half of the Year Wall Street Journal

• The US Yield Curve Has Hit Its Deepest Inversion Since 1981 Yahoo Finance

• Airlines Struggled Ahead of July Fourth Weekend. Their Stocks Didn’t CNBC

• High-Yield Bond Deals Are Back Axios

• Twitter Threatens Threads Lawsuit Against Meta Reuters

• An Airbnb Collapse Won’t Fix America’s Housing Shortage Vox

• Central Banks Are Exceptional Axios

• Suspicious Powder Found at the White House Was Cocaine Bloomberg

The Deep Insight

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