Shares in Carnival Corporation (NYSE: CCL) are showing signs of life after a 53% gain so far in 2023. While the company is still down 43% over the last 12 months, the near-term rally is a sign that investors might be becoming more optimistic about its future. That said, the coast is far from clear for this embattled cruise ship operator.

Carnival's 2023 rally has a lot to do with factors outside company control. For starters, falling inflation and relatively mild Federal Reserve rhetoric have convinced many market participants that the U.S. central bank could win its battle against rising prices without tipping the economy into a deep recession. This possible scenario has been dubbed the "soft landing," and it has raised valuations for almost all companies, especially unprofitable ones like Carnival. 

For Carnival, lower rates will make it easier to obtain the external financing it needs to survive and expand its operations, while falling inflation could eventually improve margins by lowering the cost of doing business. Furthermore, cruises are consumer discretionary purchases, which aren't necessary for survival. So a soft landing would help Carnival avoid the demand destruction that would occur in a normal recession. 

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Source Fool.com