Investing.com -- Markets have largely "priced in" hopes that elevated inflation in the U.S. will be corralled without causing a meltdown in the broader economy, analysts at Barclays said on Friday.
Earlier this week, the latest consumer price index showed that annual headline inflation in the world's largest economy rose by less than expected in July. On a monthly basis, the reading was unchanged from 0.2% in June. Meanwhile, U.S. job growth slowed last month, although solid wage gains and a slight dip in the unemployment rate suggested that there is lingering tightness in the labor market.
In a note to clients, the analysts argued that the numbers "remain supportive" of a so-called "soft landing," in which rising interest rates cause inflation to cool but do not cause a severe economic downturn.
This scenario "has arguably become consensus and looks much priced in now after the late broadening in market leadership, pick-up in equity inflows and collapse in volatility," according to the analysts.
They also described trading in August as "choppy [...] with technicals/positioning no more a tailwind for stocks, and some soft landing fatigue."
But the analysts added that they believe equities will still continue to "grind higher" absent any "negative growth/positive inflation surprises."
"Big picture, although we see room for further moderate gains into year end, the path ahead is not straightforward," they said.