People are terrified about a recession — and that means the economy is about to get a whole lot better

These factors don't mean the US is going to get back to the Federal Reserve's 2% inflation target anytime soon, but it's clear the situation isn't getting worse.  GOOD

NEWS FOR STOCKS So in the face of seemingly unrelenting negativity, there are clearly some upsides: Stronger nominal economic growth and the likelihood that future price hikes won't be

as steep. And since the stock market has mostly been fed negative news over the past few weeks, there's good reason to think that investors have fully digested these fears. As the

outlook starts to improve, that should be a positive catalyst for equity markets. Moreover, the market had already priced in numerous Fed interest-rate hikes over the course of the year, so

any further increase in rates wouldn't shock the market or send it into a downward spiral. There are, of course, some risks. For one thing, labor markets may continue tightening,

putting upward pressure on wages. Eventually, this could put pressure on inflation at a time when price growth would still be a fair bit above the Fed's longer-run objective. It's

almost like a person getting in shape: "I've dropped 30 pounds over the past 12 months, but my cholesterol is still over 250!" Much like the journey of this theoretical

dieter, the Fed's journey is not yet complete. If these inflation pressures keep the overall rate higher than the Fed wants, even as prices for some goods come down, this could force

the Fed to get even more aggressive down the road — which would be a surprise for investors and probably drive stocks lower.  But for now, it seems like things are getting better — despite

what you may have heard. Inflation is not surging away from the Fed. Underlying demand is accelerating. Put differently, the composition of the US's nominal economic growth is

improving: Instead of growth coming just from rising prices, we're also seeing a bit more growth from moving a larger quantity of goods. That's welcome news for the stock market

and for the anxieties of everyday Americans. ------------------------- _Neil Dutta is Head of Economics at Renaissance Macro Research._ Business Insider's Discourse stories provide

perspectives on the day's most pressing issues, informed by analysis, reporting, and expertise. RECOMMENDED VIDEO