CEO Confidence Wanes

Last week we learned that the consumer-price index increased 8.6% in May from the same month a year ago – the highest reading since December 1981. With this development, the Fed is expected to continue to raise interest rates in an attempt to tighten financial conditions. This week we will receive retail sales and consumer sentiment information. We will be interested to see if there continues to be a discrepancy between negative consumer sentiment and relatively strong consumer spending. On the corporate side, CEO business confidence is starting to wane as worries mount over the rising costs of production, labor, energy, and supply chain-related logistics. CEO confidence levels are correlated with corporate profits – serving as an important data point that helps us monitor the speed of the slowdown. The debate over a soft landing vs. hard landing continues across markets. At this point, we’re still leaning towards a near-term baseline scenario of a softer landing. But if the pace of the slowdown accelerates, as this CEO confidence data seems to suggest, the risk of a hard landing is likely to rise.

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