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US hard-landing narrative could come back to life again: Macquarie

Published 2024-10-07, 10:28 a/m
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Investing.com -- According to Macquarie analysts, while the strong September employment report has revived the "American exceptionalism" narrative, the possibility of a US hard landing could resurface.

The report reflects a robust labor market, but Macquarie warns that economic concerns may shift toward fiscal tightening rather than monetary policy in the near future.

"We're suspecting that a US hard-landing narrative could come back to life again," said Macquarie.

They explained that this scenario is more likely to be driven by concerns about a potential "fiscal cliff" in 2025 rather than any immediate worries about the Federal Reserve's monetary policy tightening.

With the current US deficit standing at -7% of GDP, Macquarie expects this issue to be addressed after the 2024 presidential election.

The analysts highlighted that if fiscal adjustments are made, they are more likely to occur under a Kamala Harris administration than under a Donald Trump administration.

They explained that this suggests that post-election policies could play a crucial role in shaping the economic outlook.

For now, the firm believes the focus is on how the Federal Reserve will respond to the latest employment data. Macquarie pointed out that it will be important to observe whether and how various Fed officials, including Minneapolis Fed's Neel Kashkari, Atlanta Fed's Raphael Bostic, and St. Louis Fed's Alberto Musalem, integrate the report's findings into their commentary.

Macquarie remains cautious about the medium-term outlook for the US economy, particularly with the potential for fiscal tightening to trigger renewed concerns about a hard landing.

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