Key Takeaways for Savvy Investors
Plenty of risks remain as we kick off 2023 and volatility is likely over the next few months.
However, there are some potential bright spots ahead as well.
Inflation has likely peaked.5 The uncertainty of an election year is behind us. Equity valuations have dipped significantly from their highs.3
Does that mean that markets aren’t going to fall further? That’s not knowable.
While history teaches that inflation peaks often coincide with market bottoms, we still have a potential recession to contend with.6
However, a change in the Fed’s position toward interest rates or signs of a strong economy could definitely reward us with rallies.
Let’s talk about those recession fears.
The odds favor a recession this year. Historically, inflation rates above 5% mean the probability of recession spikes, especially when paired with a low unemployment rate.7
However, probabilities are not certainties. The economy could avoid a recession; if one comes, it could be shallow and short. U.S. consumers still look healthy and the job market is still robust.2
If we were to assign the first few months of 2023 a motto, we’d say: “Be flexible.” Let’s look for opportunities hiding in the uncertainty.
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