For months now, it looks like all we have encountered are unfavourable headlines. However after we minimize by way of the noise and have 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 yr? 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 robust, shoppers and companies stayed assured, and the economic system grew. Did it develop extra slowly than final yr? 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 many years, the Federal Reserve (Fed) adjusted its language in Might to counsel a pause could also be so as. None of this may have occurred had progress remained finally yr’s stage. That slower progress ought to assist assist the markets and economic system within the second half of the yr.
The Street Forward
Whereas the debt ceiling was resolved and not using a disaster, the banking system stays below stress. The U.S. relationship with China is rocky, and the battle in Ukraine continues. We’ve almost 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 could pause. And the worldwide state of affairs, whereas worrying, is not any extra worrying now than it has been for the previous yr or so. Mixed with robust job progress and client confidence, we get an economic system that appears very like it did at first of the yr. And that economic system proceeded to outperform. With low expectations, it could nicely accomplish that once more.
For extra on our expectations for the U.S. economic system and the fairness and stuck earnings markets, learn our 2023 Midyear Market and Financial Outlook, out there now.
Reducing By the Noise
The headlines inform one story. However does the info inform one other? Obtain our Midyear Outlook to search out out.