Market doubts the Fed's anti-inflation strategy, the argument of the U.S. economy "not landing" reappears

Wall Street is fiercely debating the future of the US economy: soft landing, hard landing, or no landing at all?

Last Friday's non-farm payroll data far exceeded expectations, reigniting concerns about rising inflation and the tightening of the Federal Reserve's monetary policy. Amid mixed signals, the market is in a wait-and-see mode, and the discussion of whether "good news is really good news" has resurfaced, with the argument that the US economy may not experience a landing once again.

Kevin Mahn, President and Chief Investment Officer of Hennion & Walsh, said:

"I think so, until we get more information from the Federal Reserve, and we still have one more election, the results of which are uncertain."

However, Yahoo Finance analysts stated that despite the current warnings of "no landing," the optimism for a "soft landing" still exists, while concerns about a "hard landing" are almost non-existent - as the US stock market continues to surge, these concerns seem to be diminishing.

Bullish Sentiment in the US Stock Market, but Bullish Trend is Weakening

"No Landing" typically refers to an economy that does not experience the expected slowdown or recession after a period of high growth, but instead continues to maintain strong growth momentum without effectively controlling inflation levels, leaving the Federal Reserve with little room to cut interest rates. Stocks benefit from strong economic performance on one hand, but are also suppressed by rising risk-free interest rates, leading to overall volatile trends.

Currently, the sentiment in the US stock market is high, with CNN's Fear & Greed Index at 72, not far from the "extreme greed" level of 75.

However, the "no landing" warning has made the market more cautious. Many signals indicate that investors' bullish sentiment towards the stock market is weakening.

Bond yields are soaring, and the US yield curve is once again trending towards inversion. The volatility index in the bond market has just jumped to the highest level this year, indicating investors' anxiety about market turbulence. Historically, when the volatility index in the bond market surges, the stock market often experiences volatility as well.

Stock Liquidity Surging, Will the Bull Market Continue?

Michael Howell, founder of Capital Wars, stated that stock liquidity is surging, saying:

"Rising liquidity is supporting risk assets, recent events have proven this relationship. Risk assets have experienced significant volatility recently, but the rise in liquidity levels is supporting their upward trend."

Howell also pointed out that a typical liquidity cycle usually lasts 5 to 6 years, and the current cycle is only about one-third through. This aligns with Mahn's observation that the average duration of a bull market is about 5.3 years, and currently, we are only in the second year. Mahn said:

"If history is any guide, we still have a few years of bull market ahead of us."