Goldilocks Economy Is a Fairy Tale Too Good to Be True
The recent stock-market rally is but a wild race to load up on risk
What investors really liked in the 1990s was a Goldilocks economy—not too hot, not too cold, just like the porridge she eats in the fairy tale. To the delight of investors, Goldilocks seems to be back, in spite of full employment that ought to push up wages fast.
The bull case is that inflation was, after all, transitory. The Fed will realize that it doesn’t need to be hawkish and rates will come down without unemployment needing to rise much, if at all. Goldilocks says to go ahead and buy stocks.
Fed Chairman Jerome Powell has stopped challenging the bulls... However, he has reiterated that the strong jobs market means rates will have to be higher for longer, a message the bond market has started to absorb but stocks seem to be ignoring.
James Mackintosh WSJ 8 February 2023
https://www.wsj.com/articles/goldilocks-economy-is-a-fairy-tale-too-good-to-be-true-11675860231
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