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US can orchestrate soft landing through fiscal stimulus – Piper Sandler

US can orchestrate soft landing through fiscal stimulus – Piper Sandler  

Analysts at Piper Sandler said in a Monday note that the US could orchestrate a soft landing through fiscal stimulus measures such as student loan forgiveness, tax cuts, and more defense spending, among other things.

According to analysts, the absence of conventional growth drivers in the economy means that avoiding a recession could necessitate fiscal generosity.

“In order to have a soft landing in 2024, additional fiscal stimulus would be needed (such stimulus definitely kept the economy stronger, longer in 2023),” analysts said.

Analysts outlined several fiscal measures the government could opt for to accelerate economic growth in 2024.

These include more student loan forgiveness, distributing grants under the CHIPS Act, and the recently proposed Wyden-Smith tax cut deal.

In addition, Piper Sandler also listed Employment Retention Credit (ERC) payouts and the $95 billion defense bill which has recently passed the Senate, and now awaits House action.

If the aforementioned steps come to pass, it could translate to an additional 1.5% boost to GDP from fiscal stimulus this year, analysts said.

“If all the above come to pass, it would take our 2024 real GDP forecast from -1% to +0.5%, and keep worst case unemployment below 4.5%, saving roughly 1.5m jobs,” they wrote.

“A confirmed soft landing would be good for (nominal) earnings, and in turn stocks,” analysts added.

One potential downside of this strategy is that it could hinder the Federal Reserve’s ability to lower interest rates given the robust economic environment it would create.

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