Is the US headed toward a recession despite cooling inflation?

The Producer Price Index (PPI) unexpectedly dropped in May, signaling cooling inflation. However, Northwestern Mutual Wealth Management chief investment officer Brent Schutte believes the economy is still on track for a recession and joins Morning Brief to lay out his case.
“I think investors are discounting too easy of a process. They think miraculously inflation is going to come down without causing or having the economy slow too much to cause a recession. They think the Fed is going to be able to miraculously cut rates and keep a slowing economy from moving toward a recession,” Schutte says. He believes that a recession is the most likely outcome, pointing to the low-end consumer already under pressure from credit card and auto loan debts.
Schutte explains that the current market is bifurcated: “While the S&P is up, every other part of the market is down. And the S&P has been driven by the ‘Mag Seven,’ which are up 17% while the rest of the S&P 493 names are actually down 2%.” He adds, “I think there’s opportunities for investors. Unfortunately, they’re not in places that people are looking right now.”
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