As earnings season unfolds, fund managers are closely evaluating the strength of the US economy amid discussions of a potential soft landing. Major banks, including JP Morgan and Morgan Stanley, have reported robust third-quarter earnings, which bolster the optimism surrounding economic stability. JP Morgan's earnings report on October 11, 2024, particularly supports a soft-landing scenario, with corporate revenue growth in Q2 showing a modest increase of 1.1% and positive EBITDA for the first time in five quarters. [02f06070]
The S&P 500 is projected to experience earnings growth of approximately 4% for Q3, with the so-called 'Magnificent 7' companies expected to see earnings growth of 20% year-over-year. Christian Mariani from JP Morgan Asset Management anticipates trend-like growth extending into 2025, while Kristina Hooper notes that high earners are significantly driving the economy. [02f06070]
Despite the positive indicators, analysts caution that risks remain, including the upcoming US presidential election, ongoing conflicts in the Middle East, and potential cracks in the labor market. Ross McSkimming predicts a deceleration in growth but does not foresee a recession, while Oliver Blackbourn highlights solid economic indicators, including a growth rate of 3.2%. Karan Talwar emphasizes the ongoing strength in jobs and retail sales as key components of the economy's resilience. [02f06070]
In the broader context, discussions among banking executives have also focused on the implications of a soft landing for commercial real estate. Catherine Keating, the global head of BNY Wealth, recently forecasted a US soft landing, stating that economic growth remains strong and is expected to continue into 2025. This optimism is echoed by Apollo Global Management CEO Marc Rowan, who noted that the GDP expanded by 1.6% in the first quarter of 2024, defying recession predictions. [72e5cbdc]
A recent survey by Altus Group reveals that market participants are divided on the likelihood of a recession, with 58% expecting any downturn to be shallow and short-lived. Princeton Economist Alan Blinder pointed out that there have been five soft landings from 1965 to 2019, suggesting that such outcomes are possible. The Federal Reserve's recent 50-basis point rate cut has sent mixed signals about the economy, with 45% of respondents believing a recession is unlikely. [c3556abb]
Despite the mixed signals, 79% of survey respondents expect net operating income (NOI) growth to remain steady or increase over the next 12 months. The Fed's rate-easing cycle is anticipated to continue through 2025 and possibly into 2026, which could further support commercial real estate. However, the article 'The High Costs of a Soft Landing' warns of potential negative consequences, such as asset bubbles and financial instability, emphasizing the need for proactive measures to address economic imbalances. [b744215a]
In this context, Vatsala Kamat's Moneycontrol Pro Panorama discusses various economic topics, including the implications of a soft landing on consumer spending and the necessity for effective monetary and fiscal policies to manage the transition to a sustainable growth path. These discussions reflect a broader concern about how economic conditions will impact various sectors, including commercial real estate, as the market navigates these uncertain times. [0fbc2a2b]