Markets have now accepted two narratives – “higher (interest rates) for longer” and “soft landing”, i.e., normalized inflation without a significant slowdown. In our view, these are not compatible with each other, especially given the high level of debt in the US. 

The resilience in the economy has been mainly thanks to expansionary fiscal policy and some proactive management by businesses. Both of these are running on borrowed time. 

As such, we feel a significant slowdown has only been postponed by a few quarters and that investors are not getting properly rewarded for taking on US stock market risk.