Economics
Hard Landing
A hard landing is the failure mode of monetary tightening. Instead of cooling gradually, demand collapses, unemployment jumps, and the economy contracts, sometimes severely.
Hard landings often follow aggressive rate hikes that overshoot, or shocks that hit an already fragile economy. Because policy acts with a delay, central banks can find themselves too tight just as the economy rolls over.
Investors bracing for a hard landing typically reduce exposure to cyclical and highly leveraged names and shift toward cash, high-quality bonds, and defensive sectors.
Example
If the Fed keeps rates high well after the economy weakens, the result can be a hard landing marked by rising layoffs.
Hard Landing — FAQ
What is Hard Landing?
A hard landing is when efforts to slow inflation push the economy into a sharp downturn or recession rather than a gentle slowdown.
Can you give an example of Hard Landing?
If the Fed keeps rates high well after the economy weakens, the result can be a hard landing marked by rising layoffs.
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