Where we are tracking: soft vs hard landing | Research

We show how 40+ economic and market indicators are tracking vs historical soft and hard landings.
The start of “late cycle” is defined as the first month that the conference board leading vs coincident differential falls below -2.5%. This allows us to capture the lead up to high inflation recessions (69,73,79,81), low inflation recessions (90,00,06) as well as soft landings (66,96,98).
Equities are mostly discounting a soft landing, fixed income is broadly consistent with a high inflation recession, while commodities are recessionary.
What stands out to us is that defensive sectors (utilities, staples, healthcare) are priced for soft landing and stand to outperform in a recession.
US labor markets and GDP are consistent with a soft landing, but housing, manufacturing and credit is recessionary. The consumer data is surprisingly mixed.