Is A Brief Recession The Silver Lining For Investors? One Economist Seems To Think So

In the ever-evolving economic landscape, the debate between a short recession and a prolonged stagnation, or "soft landing," has taken center stage.

What Happened: Frances Donald, chief economist at Manulife Investment Management (NYSE:MFC), recently offered a fresh perspective on this topic, suggesting that a temporary recession might be more advantageous for investors.

Donald told CNBC she believes that the Federal Reserve's actions, or lack thereof, play a pivotal role in this debate. She posited that only a genuine recession would compel the Fed to slash interest rates.

In contrast, a stagnant economy, devoid of growth and without any intervention from the Fed, could spell trouble for investors, she said. 

Supporting her stance, Donald pointed to the recent data from the Labor Department. The report showed an addition of 336,000 jobs, far exceeding the projected 170,000.

Also Read: Recession Is Not Completely Off The Table Despite Healthy Economy: Janet Yellen

The data underscores the robust nature of the U.S. economy. Yet, Donald told CNBC she foresees a looming recession.

She further elaborated on the economic headwinds, such as escalating interest rates and swift credit contraction. Other concerns include a paralyzed housing market and consumers exhausting their savings. "We can't get growth to come above 0%," Donald added.

Concluding her insights, she emphasized to CNBC that, while recessions are typically perceived in a negative light, in the current context, a brief recession might be a more favorable outcome. Such a scenario could lead to essential rate cuts by the Fed, potentially offering a silver lining for investors in the long haul.

Now Read: Over $541B Could Exit US Banking System In 'Severely Adverse' Scenario, Fed Warns

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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