Billionaire venture capitalist Chamath Palihapitiya believes the U.S. economy will more likely see a soft landing contrary to the wide perception of a hard landing.
"A soft landing is one in which U.S. growth slows (but doesn't crater), endures a few more rate hikes in 2023, a market that finishes the bottoming process that it started in November 2021 and sets itself up for a sustained forward-looking rally and a 2024 where rates can slowly be cut and the capital markets re-open," Palihapitiya said in his tweet.
According to the investor, the next few quarters will probably witness the last few innings of the process of unwinding the zero interest rate policy for the foreseeable future.
"Anyways, it looks like the hard-landing crowd has begun to capitulate and is now seeing the world similarly to how the soft-landing crowd sees it," he stated.
The investor's comments come at a time when Wall Street has begun showing concerns about the possibilities of extended rate hikes by central banks and a subsequent recession. The fears seem to be justified given the recent central banking developments.
The Federal Reserve has indicated it will hike rates by another 50 basis points this year, and the Bank of England implemented a similar hike in its recent policy following a higher-than-expected inflation print for May in the U.K.
The SPDR S&P 500 ETF Trust
U.S. Markets: According to Palihapitiya, market sentiment is never an absolute argument but a relative one.
"Meaning, most professional money people need to be mostly invested, most of the time somewhere in the world - so when they hate one market, they are usually forced to find another they may hate a little bit less," he said.
The investor believes that with China entering a turbulent period and Europe slowing and likely in a recession, the U.S. is pretty much standing alone.
"All of this considered, the setup for U.S. equity markets seems pretty good. Especially as we look past 2023/2024 and focus on the U.S. economy and earnings in 2025/2026 and start to like what we see," he said.
