The volatility that the market experienced in 2022 is likely to continue, but our outlook for 2023 has improved. The Fed is trying to thread the needle between slowing growth enough to curtail inflation while at the same time avoiding a recession—a feat known as achieving a “soft landing”—but that’s a very narrow opening. The consensus is that the U.S. will experience a short lived and shallow recession, but a “soft landing” cannot be ruled out as an even better alternative. As 2022 came to a close, inflation expectations had already started to reverse course as a result of the Federal Reserve raising the federal funds rate seven times throughout the year. Many of our sources believe that inflation levels in 2023 will come down to about 2.6-3.0%. In 2024, levels are predicted to return to the Fed’s standard goal of 2.0% or even temporarily lower.
The markets have priced in a substantial amount of recessionary risk, which gives cause to believe it is a great time to nail down a long-term plan and take advantage of the price levels that resulted from last year’s decline. With opportunities to rebound during an expansionary period, we believe that companies that have proven themselves to be of great quality will lead the way in the latter half of the year. Companies with solid fundamentals that can grow earnings and defend their margins will likely move higher in 2023. Because the markets are forward looking, many investors have already considered that supply issues may be resolved this year, employment rates may soften, and housing market struggles will likely continue while rates are elevated. Although we may not have a year as strong as those of recent memory, the market has a chance to return to the slow-and-steady levels of growth that have historically proven to be effective for long-term investors.
To sum it all up, brace yourself for a bumpy ride in 2023 – but one that presents opportunities to craft a well-balanced, long-term portfolio. We are mindful of the risk and volatility that comes with investing in this era, but we are not afraid to lean in because history is on our side. You shouldn’t be afraid either.
As always, we are happy to discuss, answer any questions, and reassess your personalized portfolio, so please do not hesitate to reach out. We are excited about what 2023 has in store!
Past performance is not a guarantee of future results.
BNY Mellon | Pershing is our clearing and custody provider. Olistico Wealth, LLC, a registered investment adviser. Pershing and Olistico Wealth, LLC are separate, unaffiliated companies, not responsible for each other’s services or policies. Pershing LLC (member FINRA, NYSE, SIPC) is a BNY Mellon company. Past performance is no guarantee of future results.