As the governing narrative in the market continues to point towards soft landing, the economy and certain parts of the market keep flashing danger and point towards recession. And the problem is that, at this point, both are right. Proponents of the soft landing will argue that unemployment is low, markets keep climbing the wall of worry and the economy is growing at a decent pace. Those that defend we’re heading to a recession, such as Stan Druckenmiller (see chart below) among others, look through the market headlines and see poor market breadth, big deterioration in the banking, retail, home builders and autos sectors, as well as in consumer debt. On top of that, the fiscal deficit and the Treasury debt are trending dangerously higher. We’re very close to a tipping point.
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