On Friday, US stock closed the week with the momentum of three consecutive days of rising. Among the three major stock indexes, S&P 500 index rose 3.6%, the best week since early July; the Nasdaq Composite Index, mainly technology stock , rose 4.1%, stopping the three-week continuous decline.
short squeeze stocks also ushered in a big counterattack. Goldman Sachs tracked the largest short selling of US stocks, , which showed that from Wednesday to Friday, the stocks with the most short bets rose by more than 12%, the largest three-day gain since the end of May.
After the senior official of the Federal Reserve , including the first and second leaders, delivered a "eagle-full" speech, market pricing showed that the third consecutive rate hike in September was almost a "confirm" to hike, with a 50 basis point interest rate hike in November (the probability of hike in 75 basis points rose to 16%), and a 25 basis point interest rate hike in December.
In addition, the US Treasury break-even interest rate (especially short-term interest rate) that measures inflation expectations has fallen sharply, among which the break-even interest rate of the two-year US Treasury has fallen to its lowest level since January 2021.
Under such an aggressive rate hike path, US stocks still rebounded this week, which undoubtedly highlighted the market's desire for a "soft landing".
Goldman Sachs chief economist Jan Hatzius has been firmly standing in the "soft landing" camp since the Fed raised interest rates this year. Hatzius said in a report this week that the U.S. economy is still likely to land softly and believes that the probability of a moderate recession starting next year is 33%, down from 50% obtained by the Wall Street Journal through a survey of economists.
As for why we think the United States will achieve a soft landing, Hatzius gave the answer in an interview with the media this week.
Hatzius points out that historically, in the three soft landings of the United States since World War II (1965, 1984 and 1994), the Fed has not tried to lower inflation, but only prevented it from moving higher further. But in the case of the present, when the Fed set out to lower inflation, it does always push the economy into a recession.
But he further pointed out that the latter occurred mainly in the 1970s and 1980s, when inflation expectations were very high and high unemployment rates were needed to lower public wage levels and prices. However, today’s situation is very different, with inflation expectations much lower. For example, the spread between conventional bonds and the Inflation-Indexed Bond shows that inflation is expected to be 2.4% over the next five years, and the surveys of the University of Michigan and the New York Fed are also at the same level.
Therefore, Hatzius believes that reducing the real inflation rate to 2% does not require a serious monetary tightening.
In addition, the non-farm employment population in the United States increased by 315,000 in August, slightly higher than the expected 300,000. The employment market remains strong, which undoubtedly boosted the market's expectations of a "soft landing".
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