Darius sat down with Maggie Lake on Real Vision’s Daily Briefing this week to discuss asset markets, productivity growth, Immaculate Disinflation, and more. 

If you missed the interview, here are three takeaways from the conversation that have significant implications for your portfolio: 

1. A Tug-of-War Has Emerged Between The No-Landing And Soft-Landing Scenarios

Asset markets have pivoted to a soft-landing as consensus since late October, driven by positive surprises in growth, global liquidity, and productivity, as well as favorable treasury net issuance policy.

At the current juncture, the probability of a soft-landing scenario is in the process of peaking, and the no-landing scenario is gaining share.

The no-landing scenario is not yet the modal outcome, however. The February ISM Services Report provided insight into various metrics, including the Headline ISM Services PMI, Prices, New Orders, Employment, Number of Industries Reporting Growth, and Supplier Delivery Times. Collectively, these metrics supported the soft-landing scenario at the expense of the no-landing scenario.

2. Above-Trend Productivity Growth Will Likely Be Sustained For The Next Few Quarters

The recent surge in AI, coupled with decreased employee turnover rates and the thawing of global supply chains between the manufacturing and services sectors, has collectively fueled above-trend productivity growth. 

We anticipate that this momentum in productivity is likely to be sustained over the medium term.

This is important for investors because higher productivity puts less pressure on corporate margins, reducing the need for corporations to shed costs and/or pass on price increases to consumers.

3. Immaculate Disinflation Is Likely to Dissipate In The Second Half of This Year

Immaculate Disinflation persists.

Despite the two hot inflation prints from last month’s CPI and PCE Deflator reports, the Fed recognizes that a single month’s data does not establish a trend. They prefer to see sustained patterns over multiple months before considering a policy shift. 

That said, we believe that the “Immaculate Disinflation” narrative is likely to come to an end in the second half of this year.

That’s a wrap! 

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