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Members of D.A. Davidson & Co.

Expect Normalization, Not Severe Recession

"Expect normalization, not severe recession

Investors may be tempted to stock up on cushions as the debate heats up over whether the global economy will experience a hard or soft landing. But the data so far barely show a loss in altitude, let alone a sharp descent. Economic patterns have been abnormal for the past two years, but are slowly reverting to pre-pandemic form. Different countries and sectors are normalizing at different rates, creating market turbulence and exposing economic forecasts to ridicule. We expect a significant moderation in inflation over the next 18 months, as financial conditions tighten and economic growth slows in the world’s largest economies. But a mild recession is certainly not out of the question. 


Job security is the new consumer confidence

Consumer spending is keeping the developed world growing, with many countries still benefiting from pandemic-era pent-up demand and excess savings. Jobs have returned quickly and wages are rising about as fast as prices. Yet consumers have almost never reported feeling so down in the dumps. Sentiment surveys are registering lower readings today than even in the midst of the 2008 financial crisis. But while consumers aren’t talking the talk, they are walking the walk: growing their spending well in excess of inflation. Rising net worth and job security are far more important predictors of consumer behavior than comments people are willing to share with survey takers."


(From pain to gain - Viewpoints from the Global Investment Committee - midyear 2022 outlook dated 07/06/2022 by Brian Nick, Chief Investment Strategist, with Nuveen’s Global Investment Committee)


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