Talk about an on-going debate?!  The opinions of whether we’ll have a recession and if so – how deep – are front and center!!

It’s hard NOT to believe we’ll have a recession in 2023….  Some companies have started to announce future layoffs, the Fed’s going to raise rates at least a few more times, and consumer spending on goods is starting to slow, as are corporate profits.  Not to mention the inverted yield curve — the 2-Year treasury yield has held well above the 10-Year yield for a significant amount of time.

Inflation (which of course is the catalyst for our current situation), has started to shift from rising costs of goods, to rising costs of services.  Goods inflation has begun to moderate, as perhaps we are spent out from the pandemic.  For “goods,” I’m referring to housing, automobiles, household products, etc… I’m starting to see a little relief at the grocery store.  I also believe many of us are pausing before we spend!

This week, we’ll hear the November Consumer Price Index (CPI) report on Tuesday morning @ 8:30, followed by the Federal Reserve Rate hike announcement & explanation on Wednesday.  These reports will definitely impact the equity &bond market direction through New Years Eve.

Going forward, many believe the Fed will raise rates too high, pushing any recession more towards the longer-side.  Keep in mind, it takes several months for the economy to absorb the impact of a rate hike, or a rate reduction. 

The fact is – no one knows with certainty if we’ll have a recession, and if so, how deep and how long.  A recent Goldman Sachs report suggests we can avoid a recession with a soft economic landing.  Let’s hope they are correct!!

The Markets

Last week reversed the short-term positive momentum, with all major stock indexes down between 3 and 5%.  The catalyst (last Friday’s job report), suggested that wages rose higher than expected.  This was debated all week, pushing the markets lower.

With a few weeks remaining in 2022, the S&P 500 is currently down (16.17%), the Nasdaq down (29.66%), the Russell 2000 down (18.94%), and the Dow off (5.95%). 

Bonds as measured by the Bloomberg Aggregate Index are down (11.84%).

Over the next couple of weeks, I’ll be discussing portfolio positioning for 2023. Stay tuned!!!

As always, if any of your friends or family might benefit from this information, please feel free to share!

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