The Federal Reserve has a tough job ahead. First, it must tame inflation, now its top priority. Second, it must avoid pushing the economy into a recession.

That sounded like an impossible task in June. This month, things look better as the economy faces tailwinds, falling oil prices, and strong job growth. They could help the nation’s central bank engineer a soft landing. That combination of moderate inflation and economic growth is an ideal macroeconomic environment for equities.

Rising oil prices have been one of the critical drivers behind the resurgence of inflation since the world economies eased pandemic lockdowns and returned to normal. They acted as a supply-side tightening, pushing commodity prices higher while slowing economic growth. That’s a situation economists call “stagflation,” which worsened with the Russian-Ukraine war and the European embargo on Russian oil.

But after peaking around the low $120s last month, crude oil is now trading around the $100-mark, already driving transportation costs lower, as evidenced by a sizable decline in the Baltic Exchange Dry Index.

The falling in oil prices acts as a supply-side stimulus for the U.S. and the world economies that are heavy energy consumers. It helps ease inflation pressures while boosting economic growth, as lower energy costs help firms expand production.

Adding to economic growth are the continued job gains, as evidenced by a labor market report released last week. Job gains help incomes grow, mitigating the impact of the high cost of living and higher interest rates on consumer spending. Moreover, they pave the way for a soft landing or a Goldilocks economy — an economy not too hot, not too cold.

The economy grows fast enough to help listed companies increase their earnings, but not to the point of fueling runaway inflation and rising interest rates, which could hurt valuations. That’s what happened most of the 1990s, a time of solid performance for equities. And it could explain the big comeback of equities in the last couple of weeks.

Still, Don Kaufman, co-founder of TheoTRADE, is bearish in the near term due to summer doldrums and a low VIX.

“The low VIX, VVIX, and SKEW mean that the professional side of trading is not hedging,” Kaufman told International Business Times in an email.

“This situation lends itself to considerable downside risk. The VIX or implied volatility is not the barometer to follow in this situation and is not in line with price action. We can sell into the abyss very rapidly when professional traders are not hedged. If the market sells off, they would have to hedge into a falling market dynamically. This environment carries significant downside risk, with limited upside potential.”

But this situation can change quickly in either direction, depending on how the profit season unfolds.