Inflation remains high and persistent (and well above the Fed’s long-term 2% target rate), outpacing wage growth and crimping consumer spending power. The U.S. and other economies face an untested path toward normalization. This is the world’s first recovery from a pandemic in more than 100 years and there is no clear playbook.
Parts of the economy are already in a recession, and the probability is high that the rest of the economy will follow in 2023 given the Fed’s resolve to reduce inflation toward its long-term goal. Almost all past tightening cycles have eventually led to a recession. There remains a risk that the Fed could tap the brakes too hard and force the economy into a deeper-than-expected recession.
What we’re watching
- Consumer Behavior
- Pricing Power
- Supply Chain Costs
Cowen’s proprietary surveys and data show worsening consumer savings sentiment, increased plans to cut spending, and signs of inflation moderation.