There are a lot of question marks about whether or not 3% inflation is good enough. The market and the investors have to be convinced that the Fed will stay the course to get inflation back to 2% target.
And Fed Chair Powell said in press conference that continued economic strength could warrant further tightening. Remaining 2% inflation target requires below trend growth and softening in the labor market.
Right now there is a tug of war between high interest rates, geopolitical tensions, valuation is high, economy is strong, earnings trough and consumers remain resilient. The longer term lags of the rates continue to be the open question coming into the 2024: how will that impact the consumer in particular?
Are the yields the causes of recession? Actually yields do not do anything, they are more than the signals of what the capital looks like in the economy right now.
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