Markets Don’t Know What to Expect Anymore, and That’s Good
A greater diversity of economic forecasts can lead to a richer discussion and help expose previously unseen risks and weaknesses.
Who knows where the market’s headed next?
Photographer: Timothy A. Clary/AFP
When it comes to financial markets, nothing is certain. For much of the last few decades, however, it was easy to convince yourself otherwise: Interest rates mostly went in one direction, down, and high inflation was a thing of the past.
The pandemic economy, and the policies in response to it, changed all that. Not only did they bring back higher inflation and interest rates, they also altered expectations. And while the consensus is that the US economy will stick a soft landing, there is wide variation among investors, consumers and professional forecasters about future inflation rates and bond yields.