With the “soft landing” / “Goldilocks” macro theme gathering adherents in the US seemingly every week, it’s worth reiterating that there are still tails.

Yes, the June CPI report looked like real evidence of broad-based disinflation. Yes, the incorrigible American consumer is feeling much better about things, or at least according to a two-year high on a key gauge of confidence. And finally, yes, the US labor market remains resilient (or “robust” or whatever tired jobs adjective you prefer).

But amid the drowsy equity melt-up and single-digit realized vol, we should’t forget that we’re walking a tightrope, even if the odds of falling off are low in the near-term.

“The two most likely tails being considered by markets remain US centric” and reside “at polar ends of the spectrum,” Nomura’s Charlie McElligott said Wednesday.

The first tail is “a domestic growth scare large enough to resuscitate” the recession narrative and associated trades, Charlie wrote. The second is “a resumption of [an] upside inflation impulse via the positive wealth effect / animal spirits data re-acceleration we are experiencing in real-time.”

Do note: We’re actually seeing the right-tail outcome unfold. It’s just that the memory of the June CPI report, and the prospect of a similarly benign read on PCE prices this Friday, is taking the edge off. But for how long?

“We are currently seeing some goods reflation with commodities prices higher,” McElligott went on, noting that US gas prices just saw their biggest two-day advance since Russia invaded Ukraine.

He also mentioned the possibility that contract negotiations between unions and large employers could raise the risk of a wage-price spiral. Asked during Wednesday’s press conference to comment on just that dynamic, Jerome Powell was adamant: He can’t and won’t weigh in on the UPS deal or any other labor talks.

Charlie also noted that the Fed will lose the base effect in three or four months. Some macro watchers, he wrote, are concerned that the combination of these factors might eventually “force the Fed’s hand.” The Committee may be compelled to extend the tightening cycle.

Readers may be tired of hearing about the perils of a reinvigorated wealth effect, but it’s a real concern. Stocks now seem very likely to make a serious run at new records by summer’s end, and it’s not inconceivable that bonds could rally in tandem, at least for a while, on the assumption that the Fed’s done and the inflation scare is over. Perversely, that kind of mentality could sow the seeds for its own demise if the attendant multi-asset rally emboldens consumption.

Last year was among the worst ever for balanced 60/40 funds. As of this week, they’re within shouting distance of new highs, as the figure above, with McElligott’s text, shows.

And all with home prices rising anew, IG credit spreads at YTD tights and a dollar that’s still near 15-month lows, all developments that point to rising household wealth and/or easier financial conditions. With core inflation still running near 5%, that’s risky.

“Given the current state of financial conditions, the Fed has wiggle room to lean hawkishly, essentially buying insurance to ensure they continue to make progress on their dual mandate,” McElligott’s colleague Darren Shames said Wednesday, prior to Powell’s press conference. “Given the current lofty state of asset prices, I really don’t think they would be bothered by a -10% move in stocks, a slight widening of credit spreads, or a modest cooling in the housing market,” Shames added.