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.