The question on everyone’s mind is whether the Fed will be able to control inflation through a series of rigorous interest rate increases and avoid a recession. But Liz Ann Sonders, Chief Investment Strategist at Charles Schwab has doubts, which she shared in a Schwab Market Talk webcast and were relayed in a Financial Advisor article. While a recession isn’t a foregone conclusion, there are many factors that would complicate a soft landing, notably continued supply chain disruptions and the conflict in Ukraine. Combatting inflation while also trying to slow growth is “a tall task,” Sonders said.

The Fed has been very clear about their intention to raise rates aggressively, possibly in 50 basis points increments instead of the usual 25 in order to get the short-term rate back up to around 2.5%. But whether they will tamp down inflation in time remains to be seen, says another Schwab strategist, Kathy Jones. If it turns out the Fed doesn’t need to act so drastically, “I’d say the positive risk reward is probably in that more intermediate to long-term part of the curve than in short-term where it’s already priced in,” she’s quoted in the article, from the same webcast.

But as investors wait for the Fed to act, their outlook for the future has dimmed under the shadow of inflation. While the present may be copacetic, consumers are expecting things to get worse down the line, and that pessimism is showing up in lowered spending on capital goods and household durables, the article notes. Meanwhile, the housing market is in a flux that Sonders called “concerning,” and she included home building, along with household durables, as areas of the stock market that are significantly underperforming even during the most recent rally. Mortgage companies also underperformed in this rally, which Sonders believes indicates that housing has already “started to roll over,” though the situation isn’t nearly as dire as it was in 2008, she added.