Soft Landing
The ideal macro outcome: the central bank tames inflation through rate hikes without triggering a recession — rare but market-moving when achieved.
A soft landing occurs when a central bank successfully raises interest rates enough to bring inflation back to target without causing a recession. Economic growth slows to a sustainable pace, unemployment rises only modestly, and inflation cools — the "Goldilocks" outcome.
Soft landings are historically rare. Markets price in an expanding probability of a soft landing — versus a hard landing — through the relative performance of cyclical vs. defensive sectors, credit spreads, and the shape of the yield curve. A genuine soft landing is highly bullish for risk assets.
Related Terms
Business Cycle
The recurring sequence of economic expansion, peak, contraction, and trough that drives sector rotation, earnings cycles, and asset class returns.
IntermediateDisinflation
A slowdown in the rate of inflation — prices still rise, just more slowly — distinct from deflation, where prices actually fall.
IntermediateHard Landing
The painful outcome when aggressive monetary tightening overcorrects and tips the economy into recession.
IntermediateInflation
The rate at which the general price level of goods and services rises, eroding purchasing power over time.
BeginnerInterest Rate
The cost of borrowing money, set or influenced by central banks — the single most powerful lever in macroeconomics.
BeginnerRecession
A significant economic contraction — commonly defined as two consecutive quarters of negative GDP growth — that hits corporate earnings and risk assets hard.
BeginnerRisk-On
A market sentiment regime where investors favor higher-risk assets — equities, high-yield credit, commodities, and EM — over safe havens.
Beginner