Survey Reveals Majority of Investors Expect Soft Landing for U.S. Economy - Citi Analysis
In a recent survey conducted by Citi, it was found that a majority of investors are anticipating a soft landing for the U.S. economy. According to Citi analysts, over two-thirds of their clients are in the "soft landing camp," with only about 21% expecting a more severe hard landing. The remaining 11% are predicting a scenario where there is "no landing" at all.
Investor expectations for the Federal Reserve's terminal rate were also highlighted in the survey. A significant 68% of respondents believe that the Fed Funds rate will settle between 3% and 3.75%, with around 17% forecasting it will fall below 3%. Meanwhile, approximately 14% expect the terminal rate to reach or exceed 4%.
Citi analysts pointed out that key economic indicators such as core CPI, manufacturing ISM, and Non-Farm Payrolls (NFP) are currently at levels that would typically prompt the Federal Reserve to begin cutting rates. This suggests that if the economy achieves a soft landing, there could be deeper rate cuts in this cycle compared to previous periods of economic softening.
The prevailing sentiment among investors is one of cautious optimism, with a majority expecting the economy to avoid a severe downturn and the Federal Reserve to implement moderate rate cuts as a result. This aligns with the broader market narrative that has been gaining traction in recent months.
In conclusion, investors are hopeful for a soft landing for the U.S. economy, with expectations of moderate rate cuts by the Federal Reserve. This could lead to deeper cuts in this cycle compared to previous easing cycles, potentially affecting investment strategies and financial decisions.