For months now, it looks as if all we have encountered are damaging headlines. However once we minimize via the noise and take a look at the info, the story for the primary half of 2023 was easy: the markets and economic system did higher than many anticipated them to.
Will the identical maintain for the second half of the 12 months? We have a look forward in our Midyear Outlook.
Expectations Vs. Actuality
Regardless of dangers—just like the potential U.S. default on its debt—and worries about an impending recession, hiring remained sturdy, shoppers and companies stayed assured, and the economic system grew. Did it develop extra slowly than final 12 months? Positive. Nonetheless, all market indices have been up, company earnings beat expectations, and monetary circumstances remained regular.
And what about inflation? It managed to drag again, as did longer-term rates of interest. After elevating short-term charges at one of many quickest paces in a long time, the Federal Reserve (Fed) adjusted its language in Might to recommend a pause could also be so as. None of this may have occurred had progress remained ultimately 12 months’s degree. That slower progress ought to assist help the markets and economic system within the second half of the 12 months.
The Highway Forward
Whereas the debt ceiling was resolved with no disaster, the banking system stays beneath stress. The U.S. relationship with China is rocky, and the conflict in Ukraine continues. We’ve got practically as many dangers now as we did in January. Add in slower progress, and there is much less cushion for the economic system and markets to fall again on.
The dangers are actual, however so are the positives. Inflation is down. The Fed might pause. And the worldwide state of affairs, whereas worrying, is not any extra worrying now than it has been for the previous 12 months or so. Mixed with sturdy job progress and shopper confidence, we get an economic system that appears very like it did originally of the 12 months. And that economic system proceeded to outperform. With low expectations, it might nicely accomplish that once more.
For extra on our expectations for the U.S. economic system and the fairness and stuck revenue markets, learn our 2023 Midyear Market and Financial Outlook, obtainable now.
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Reducing By the Noise
The headlines inform one story. However does the info inform one other? Obtain our Midyear Outlook to search out out.