March 2023

In Section I, we address the recent improvement in several data releases over the past three months, and explain why we do not believe that these developments have increased the odds of a soft landing. US monetary policy likely became tight in November, which has started the recessionary clock. We continue to recommend a conservative investment stance over the coming 6-12 months that anticipates eventually lower long-maturity bond yields. In Section II, we explain why the Fed’s unreasonably low neutral rate forecast is the main risk to a conservative investment stance over the coming year, as it could lead to interest rates falling back into easy territory before a recession begins. For now, this remains a possible but not probable outcome.